Actuaries Detail the Drivers of Health Insurance Premium Changes for 2016

Actuaries Detail the Drivers of Health Insurance Premium Changes for 2016HEALTHCARE
Actuaries Detail the Drivers of Health Insurance Premium Changes for 2016
According to a brief by the American Academy of Actuaries the following factors affect health insurance premium changes for 2016:

  • Underlying growth in health care costs, including increased spending for medical services and prescription drugs, especially as more high-cost specialty prescription drugs come to market.
  • The scheduled reduction in the ACA’s temporary reinsurance program, which means less of an offset to insurers’ costs of higher-cost enrollees.
  • The incorporation of insurer experience regarding their 2014 and 2015 enrollee risk profiles into 2016 assumptions.
  • The ACA provision expanding the small group market to include employers with 51 TO 100 employees.

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Proposed Obamacare Rates 12% higher for 2016
HealthPocket analyzed rate filings for 3,771 plans in 45 states and found proposed Affordable Care Act premiums average a 12% rate increase for 2016. Premiums were compared for 40-year-old non-smokers in the largest city in each state. The Silver plan was the most popular exchange plan during the 2015 open enrollment period, accounting for 67% of marketplace plan selections. The 2016 rate proposals for silver plans averaged 14% higher than premiums in 2015. At a 16% increase, gold plans had the highest rate increases proposed for 2016. Entry-level bronze plans had 2016 rate proposals that averaged 9% higher than 2015 while platinum plans, the top-tier of the Affordable Care Act plans, averaged only a 6% increase in rates for 2016.

HealthPocket also found that rate increases varied significantly depending on the type of health plan. For example, among bronze plans examined, rate proposals for HMO and EPO plans were 20% higher than 2015 while PPOs were only 4% higher.

The 2016 rates represent the first time Affordable Care Act insurers have had a full year of medical claims data (including the post-deductible period) to determine rates for the new enrollee pools enabled by the law. Before the enactment, in most states applicants with expensive pre-existing conditions risked being rejected for privately purchased health insurance. Given the exclusion of this population in the pre-reform market, historical data on enrollee pools had limited value for setting Affordable Care Act rates.

Consumers will not necessarily pay the health insurance premiums proposed within the rate filings. The proposed rates must be reviewed and approved by the insurance regulators to each state in which the rates were filed. That process may result in lowering of some of the proposed rates . Moreover, some consumers will experience lower premium increases due to subsidies. Those who are unsubsidized and pay full price for health insurance, will endure the full cost of whatever rate increases are approved. For more information, visit

The Problem of Inaccurate Provider Directories
Health plans have been creating contracted network offerings at an unprecedented rate since the implementation of the Affordable Care Act (ACA). But some consumers are complaining that the provider network information from their health plan is misleading and inaccurate, according to a report by Berkeley Research Group. As a result, new federal and state regulations require health insurers to maintain and provide consumers with an accurate listing of providers, facilities and physicians participating in their networks. The repercussions of inaccurate provider directories can be significant, posing risks to consumers and health plans.

Inaccurate directory information may limit a consumer’s ability to verify if a preferred doctor is in-network or to know how many and what types of providers would have to be accessed under a particular product offering. Additionally, the consumer may be at risk of being charged higher out-of-network rates when providers are erroneously listed as being in-network. These inaccuracies also put health plans at greater risk of litigation, government penalties, and investigations, and significant administrative costs associated with rectifying inaccurate directories.

Consumers typically use provider directory information to make decisions in real time. However, the frequency with which health plans update their provider directories varies significantly. Many states only require an annual update. Additionally, states must decide whether penalties should be imposed on health plans when directories have errors, particularly when patients incur out-of-network costs because of it. Regulators may also require health plans to allow consumers to re-enroll in a new health plan if their provider has been misrepresented in a provider directory.

However, variation also exists across health plan types, with HMOs being the most regulated with respect to network adequacy, followed by PPOs and EPOs.  In a study published by JAMA Dermatology, researchers at the University of California, San Francisco, tried contacting 4,754 dermatologists listed in the three largest Medicare Advantage plans in 12 metro areas. Nearly half of the names were duplicates, and only about half the remaining—26% of the total—were at the listed address, accepted the plan and were offering appointments. The California Department of Managed Health Care (DMHC) performed a survey of Blue Shield of California showing that a significant percentage (18.2%) of the physicians listed in the directory were not at the location listed in the provider directory and that a significant percentage (8.8%) were not willing to accept patients enrolled in the plan’s Covered California products, despite being listed on the website as doing so.

Anthem customers filed 176 complaints on network issues FROM January 1 to August 31, 2014, and Blue Shield saw 130 complaints. A study into the availability of providers in the Medicaid Managed Care program performed by the Department of Health and Human Services’ Office of Inspector General offers perhaps the most glaring results. Forty-three percent of providers were not participating in the Medicaid managed care plan at the listed location and could not offer appointments. Thirty-five percent of providers could not be found at the location listed and were therefore not participating at the location listed by the plan. Another 8% of providers were at the location listed but said that they were not participating in the plan. In some cases, these providers had participated in the plan in the past; in other cases, the providers had never participated in the Medicaid managed care plan.

Health plans find it increasingly difficult to maintain accurate participating provider information in their provider directories for reasons including the following:

  • Increasing complexity in the insurance products being offered to customers.
  • The dynamic nature of participating provider information.
  • Limited resources to maintain provider directories.

One reason is that health plans are attempting to lower costs by constructing provider networks that include only certain providers within a health system. A 2014 McKinsey study of products being sold on the ACA health insurance exchanges describes partial health system participation. The study found that Forty-four percent of ultra-narrow, silver-tier products exclude at least one hospital from every single participating health system. Another 31% of the products exclude at least one hospital from at least one health system. The costs for such ultra-narrow networks are 13% lower. But these arrangements add complexity to the process of capturing the relevant information in a health plan’s provider system and ensuring that these data are propagated correctly to its provider directories. Third, a provider practicing multiple specialties or at multiple locations may be participating with a health plan for only one specialty or at one location.

Any time one piece of information for a provider listed in a health plan directory changes, the entire directory is technically inaccurate until it is updated with the accurate information. The process required by a health plan to maintain accurate participating provider information in its provider directories is complex and requires substantial resources. All of this must be performed by health plan resources that are often limited and subject to medical loss ratio (MLR) requirements.

CMS Changes Chronic Care Management
Changes to the chronic care management model by the Centers for Medicare and Medicaid Services (CMS) offers an out-of-the-box approach to improve the outcomes for patients with two or more chronic conditions. Medical practitioners can bill non-face-to-face communications with Medicare beneficiaries, reducing the need for costly direct evaluations when a simple instruction may be all that is needed. Recent analysis from Frost & Sullivan finds value in this approach.

Victor Camlek of Frost & Sullivan said, “The new reimbursement program provides a user-friendly and information-based treatment plan, allowing patients to access expert advice for treatment-related questions each month. This may have a measurable impact on the elimination of unnecessary hospital re-admissions and in-person visits.” Although this promising revenue-generating system involves a minimum of 20 minutes of non-face-to-face service, the actual cost of delivery is difficult to project. The lack of full clarity of rrequirements could make the service as unappealing from an economic perspective. The need to get patient consent for a non-face-to-face service that will necessitate co-payment, could further delay transitions to the new model. For more information, visit

Wellness Programs Effective in Uncovering Chronic Diseases
Twenty-eight percent of 750 participants in sponsored wellness programs have been diagnosed with a chronic condition in the past two years. And 46% of them discovered their chronic illness through a wellness program, according to a HealthMine survey. Seventy-four percent of employees surveyed say wellness programs should include genetic testing as a way to identify risk for chronic conditions. Some large insurers have already begun to incorporate genetic testing into their wellness programs, even as program sponsors await pending regulation over privacy and other protections. Most consumers also want plan sponsors to offer health screenings, which can detect risk factors and uncover chronic illness. In fact, 74% of respondents said they would participate in vision screenings; 73% would complete a blood pressure screening; and 69% want a cholesterol screening. For more information, visit

Group Calls on Senate to Prevent Secret Pharma Money
Section 3041 of the 21st Century Cures Act would remove reporting requirements over pharmaceutical industry payments to doctors and associations that take place in the context of Continuing Medical Education (CME). The UNITE HERE union sent letters to the Senate Committee on Health opposing the legislation. They say it would allow millions of dollars’ worth of pharmacy industry gifts to doctors’ conferences to happen behind closed doors. The bill just passed the House and is expected to be introduced in the Senate soon.

Aside from healthcare providers and pharmaceutical reps, hospitality workers are among the only people who witness the pharmaceutical industry’s presence at CME events. If Section 3041 becomes law, the rest of the public will never see what UNITE HERE members see. In the past two months, UNITE HERE has collected over 9,000 signatures on a petition to the Accreditation Council for Continuing Medical Education (ACCME) to eliminate pharmaceutical money from CME.

UNITE HERE says it is concerned about ballooning costs for its members’ healthcare plans. Prescription drugs, devices, and biologicals are a major factor in rising healthcare costs and the union is concerned doctors may be unduly influenced by contributions from the pharmaceutical industry to prescribe more expensive drugs when more affordable, generic alternatives are available. The letter was also signed by the director and the program manager of PharmedOut, a Georgetown University Medical Center Project that promotes rational prescribing. UNITE HERE represents 270,000 workers in North America who work in the hotel, gaming, food service, manufacturing, textile, distribution, laundry, transportation, and airport industries. For more information, visit

CAHU Summit in LA Next Month
CAHU’s Health Care Summit will be held September 29 in Universal City. This year’s summit, Modern Agent, is focused on modernizing with technology and automation, and will feature cutting edge sales-driven sessions, and tech vendors. For more information, visit

EPIC Jumps in Insurance Broker Rankings
EPIC climbed 21 spots from 44 to 23 in the Business Insurance Magazine’s list of the 100 Largest Brokers of U.S. The ranking is based on 2014 revenue of $151,724,409 and is a 108% increase over 2013. EPIC CEO, John Hahn said, “We have continued our growth nationally and expanded our offerings to our clients with a focus on specialty practice areas in property & casualty and employee benefits.” Headquartered in San Francisco, EPIC Insurance Brokers and Consultants has nationwide presence across key lines of insurance. Since its founding in 2007, EPIC has grown revenue from $12 million to $160 million through organic growth and strategic acquisitions. For more information, visit

Americans’ Financial Security Increasingly Tied to Employee Benefits
Nearly two in three workers strongly believe that employers have a responsibility to offer insurance and retirement benefits. In stark contrast, only 16% of employers strongly believe they are responsible for providing benefits. Yet, employers acknowledge that workplace benefits help employees and their families achieve financial security, according to a survey by Guardian.

Forty-two percent of employees get most or almost all of their insurance products through the workplace while 68% rely on their benefits for at least half of their financial preparedness. Even when employers offer these benefits, many workers do not take advantage because of poor decision-making, ineffective communication, or education efforts. Employers can improve enrollment and the perceived value of these benefits by increasing communication and transparency.

Workers who get a total compensation statement from their employer place a greater value on their benefits and consider their company’s benefits communications effective; 87% report feeling more confident in their own benefit decisions. Nearly three in four employees who get a total compensation statement say that seeing information about the monetary worth of their benefits caused them to place greater value on them. Unfortunately, just one-third of employers report providing their employees with a total compensation statement. For more information, visit

Life Insurers Focus on Living Benefit Riders and Indexed Universal Life
The popularity of indexed universal life (IUL) products has increased over the last few years as reported by participants in Milliman’s annual comprehensive study of universal life (UL) and IUL issues. Total IUL sales as a percent of total UL and IUL sales combined for survey participants increased from 25% in 2011 to 45% during the first nine months of 2014. During this period, cash accumulation IUL sales comprised 82% of total cash accumulation UL/IUL sales, and current assumption IUL sales comprised 17% of total current assumption UL/IUL sales.

Companies plan to focus more on cash accumulation IUL and current assumption IUL products, and less on universal life with secondary guarantees (ULSG). Five of the 29 survey participants reported discontinued sales of ULSG products.  During the first nine months of 2014, sales of chronic illness riders, as a percent of total sales, were 17% for UL products and 45% for IUL products.  Similarly, during the first nine months of 2014, sales of long-term care (LTC) riders as a percent of total sales were 18% for UL products and 9% for IUL products. Nearly 86% of survey respondents expect to market either an LTC or chronic illness rider within the next 24 months.  For more information, visit

National Long Term Care Insurance Sales Summit

The National Long Term Care Solutions Sales Summit will be held October 27, 2015 in Washington, D.C. For members of the American Association for Long Term Care Insurance, there is no cost to attend the conference or to watch the live stream online. For more information, visit

Financial Planning Resources
To help Americans start the retirement planning and saving process, Guardian has developed a suite of new educational tools and resources. A website offers a customized walk through your financial life and supported by calculators, infographics, blogs, and a personality quiz to help you envision your future and create the personalized pathway to get there. An Online assessment analyzes what type of saver you are to determine how to best plan for retirement. For more information, visit

401(k) Website for Retirement Readiness
Guardian Life enhanced the website, It now includes a dashboard with easy access to key retirement plan health statistics, enhanced reporting options, intuitive navigation and a resource library. These features will provide education and guidance to positively influence how plan participants engage with their retirement plans. This is particularly important as 401(k)s and other defined contribution plans are the largest anticipated source of retirement income for plan participants. Key among the enhancements is the Guardian IncomeConnect Calculator, which alerts plan participants in real-time if they are on target to meet their retirement goals. For more information, visit

10-Year Term High-Limit DI Policy Now Available
Petersen International Underwriters of Valencia, Calif. has received the exclusive rights to offer the only 10-year policy term product in the excess/supplemental disability insurance market. Working with a highly-rated European insurance company, Petersen International has developed a personal income-protection disability product that is guaranteed and non-cancellable for 10 years which is double the maximum 5 year term length found in the rest of the market.

According to Thomas Petersen, vice president of Petersen International, “This new 10 year term offering will prove to be revolutionary to the high-limit disability industry, locking in rates and commissions for a longer period than ever before. We have designed a…tool and asset for every life and health insurance advisor to provide to their clientele. The new own occupation disability product guarantees premium rates, benefit schedules and policy definitions for 10 years at a time.” For more information, call 800-345-8816 or at

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