Critical Illness Market Shows Continued Growth and Product Interest
The critical illness market seems to be taking off. The market saw an increase in reported new business premium of nearly $381 million in 2014 and an increase in-force premium of $1 billion on more than 3 million insured lives, according to a survey by Gen Re. A record 59 carriers, representing 95% of the market, participated in this year’s survey. Of those, 41 were marketing 73 different CI products. The remaining participants are exploring the market or gearing up to enter it.
Fifty-nine percent of carriers in the market plan to increase their focus on CI sales; 41% plan to maintain their current focus; and none plan to decrease their focus. While all market segments are expecting strong growth, the group and worksite segments are especially optimistic. They expect annual growth rates of 22% (issue age) and 30% (attained age) over the next three years. The CI industry seems to be moving in the direction of more benefit eligibility triggers with the average number increasing from 13 last year to 19 this year. Cancer remains the number one cause of claims. For more information, visit genre.com.
Private Medicaid Expands
Last year, 66% of Medicaid beneficiaries got coverage from a private Medicaid health plan. This year, it’s 70%, according to a study by PwC. California has the most Medicaid beneficiaries with 33% of the population covered. With so many people receiving Medicaid coverage, and budgets continuing to be squeezed, states are increasingly turning to private plans to control spending and provide budget certainty. Over the past year, private plans added 7.8 million beneficiaries. The number of Medicaid beneficiaries in fee-for-service plan or public managed care programs decreased by 1.4 million. For more information, visit pwc.com.
Medicaid and CHIP Beat Private Plans in Access to Pediatric Preventive Care
Children with Medicaid or the Children’s Health Insurance Program (CHIP) have greater access to preventive care than do children with private insurance, according to a survey by PolicyLab at the Children’s Hospital of Philadelphia. David Rubin, MD, MSCE, of PolicyLab suggests requiring private plans on the exchanges to match Medicaid’s mandatory benefit and cost-sharing provisions. He noted that some new insurance plans in the commercial market are tiering specialty providers as out-of-network, which blocks access for children with special healthcare needs.
Seventy-eight percent of caregivers of children with Medicaid and CHIP say the insurance always meets their needs compared to 73% of caregivers of children with private insurance. Eighty-eight percent of children with Medicaid or CHIP had access to preventive medical care compared to 83% of children with private insurance. Eighty percent of children with Medicaid have access to dental care compared to 77% of children CHIP and 73% of children with private insurance.
Getting specialty care is a challenge for children in all coverage types, with as many as one in four having difficulty seeing a specialist. However, these challenges are greatest for children with CHIP (28%) and for privately insured children with special health care needs (29%). Seventy-seven percent of caregivers of children with private insurance have out-of-pocket costs compared to 38% of those with CHIP, and 26% of those with Medicaid. For more information, visit policylab.chop.edu.
Double Digit Cost Spikes Hit Obamacare
Obamacare insurance plans are more expensive than last year, on average, but fewer consumers are seeing price increases in the most popular mid-level plans. Average premiums have increased by 13% for Bronze plans, 11% for Silver plans, 15% for Gold plans and 12% for Platinum plans. Last year, price increases were more moderate, increasing 7% to 10% depending on the plan tier, according to the McKinsey Center for U.S. Health System Reform finds that
“The Affordable Care Act was intended to create competition in the health care marketplace in order to drive down costs for consumers. Instead, we are seeing more insurers leave health care exchanges and mergers of insurance giants, resulting in less competition and spikes in premiums and making health care anything but affordable. It is time federal and state regulators step in to hold insurers accountable and to limit unreasonable premium increases we are seeing across the country,” said Stacey L. Worthy, Aimed Alliance’s Director of Public Policy.
Aimed Alliance said that the next president and Congress will have to address the following the shortcomings of the system:
- Quality: At least one quarter of Americans are underinsured and cannot access treatments prescribed to them due to insurers’ profit-maximizing cost-containment measures. Instead, they are relegated to trying out and failing on inferior treatments, a policy referred to as fail first.
- Efficiency: Overly restrictive policies, such as burdensome prior authorization, claims denials, and appeals processes, waste time, are costly, and must be eliminated.
- Ethics: To circumvent the ACA’s prohibition on denials of care for preexisting conditions, insurers place all medications that treat certain illnesses in the most expensive specialty tier, making treatments unaffordable for people with illnesses, such as cancer, hepatitis C, HIV, and rheumatoid arthritis, thereby deterring them from joining the plan in the first place.
- Transparency: Coverage rates and co-insurance for in-network and out-of-network services must be disclosed to allow for cost comparisons among insurers and providers, and to prevent surprise bills.
For more information, visit aimedalliance.org.
The Value of Supplemental Insurance
Many out-of-pocket expenses will rise again in 2016 as insurance companies and employers increasingly ask policyholders to pay more of their healthcare expenses. Combined Insurance is encouraging people consider supplemental insurance options. Doug Abercrombie at Combined Insurance said, “Many consumers, whether they are relying on health insurance provided by an ACA exchange, employer, or Medicare, are facing higher health insurance costs…With benefits paid directly to policyholders, supplemental insurance can provide greater peace of mind by helping to bridge…coverage gaps.”
During open enrollment, Abercrombie recommends that people review their insurance to identify changes in premium costs and coverage compared to previous coverage, and changes in co-pays, deductibles, coinsurance amounts, and out-of-pocket limits. Once policyholders understand what their primary insurance benefits cover, they can determine whether it makes sense to add supplemental insurance, Abercrombie said. He suggests considering the following types of supplemental coverage:
- Accident and sickness insurance
- Cancer insurance
- Critical care insurance
- Disability insurance
- Life insurance
For more information visit combinedinsurance.com.
The Future of Drug Therapies
When it comes to prescription drugs, patients will get more bang for their buck in 2020. They will have unprecedented treatment options, greater access to low-cost drugs, and better use of evidence to inform decision making, according to a study by the IMS Institute for Healthcare Informatics. More than half of the world’s population will live in countries where medicine use will exceed one dose per person per day by 2020, up from 31% in 2005. The medicine use gap between developed and emerging markets narrows. Total spending on medicines will reach $1.4 trillion by 2020 due to greater patient access to chronic disease treatments and breakthroughs in drug therapies. Global spending is forecast to grow at a 4% to 7% compound annual rate over the next five years.
Murray Aitken of IMS Health said, “During the next five years, we expect to see a surge of innovative medicines emerging from R&D pipelines and technology-enabled advances that will deliver measurable improvements to health outcomes. With unprecedented treatment options, greater availability of low-cost drugs, and better use of evidence to inform decision making, stakeholders around the world can expect to get more bang for their medicine buck in 2020 than ever before.
More than 90% of U.S. medicines will be generics by 2020. Spending on medicines in the U.S. will increase 34% over 2015. Prices for protected brands will remain constrained by payers and competition, resulting in 5% to 7% annual price increases. The Affordable Care Act (ACA) will continue affect drug spending during the next five years largely due to expanded insurance coverage. By 2020, there will be broad adoption of ACA provisions that encourage greater care coordination and movement of at least one-third of spending to an outcomes or performance basis.
More than 225 medicines will be introduced by 2020, with one-third focused on treating cancer. Disease treatments in 2020 will be transformed by the increased number and quality of new drugs in clusters of innovation around cancer, hepatitis C, autoimmune disorders, heart disease and an array of rare diseases. During the next five years, 75 new orphan drugs are expected to be available for dozens of therapeutic areas that have limited or no treatment options. By 2020, technology will enable more rapid changes to treatment protocols, increasing patient engagement and accountability, shifting patient-provider interaction, and accelerating behavior changes that improve patient adherence to treatments. Every patient with multiple chronic conditions will have the potential to use wearables, mobile apps, and other technologies to manage their health, interact with providers, fellow patients and family members. The universal use of personal devices, electronic medical records, and real-world data will offer providers and payers new ways to control costs. The full report is available at theimsinstitute.org.
Why Women Still Aren’t Sold on Sales Careers
More than 60% of women don’t consider sales as a career option, according to a study by Guardian. Sixty percent have not even considered a job in sales, and only 22% are even somewhat open to a career in sales. The study identifies five barriers that stifle women’s interest in sales careers:
- Women fear they don’t have the ego-driven personality to succeed in sales—77% say they’re not pushy enough for the job.
- Women stifle their inner swagger. Seventy-two percent say they can lead their team to success at work, but women rank being a leader 11th among their top traits.
- Inertia feels safer than risk. One in two women is most comfortable sticking to her routine. Women play it safe, which influences why they think sales isn’t for them and 57% don’t know what it would take to be successful in sales.
- Women are navigating the workforce without a career map. One in three women doesn’t have a mentor.
- Perfection equals pressure. Eighty percent set the bar very high for themselves professionally. Seventy percent say they’d always be stressed and under pressure in a sales job.
Emily Viner, vice president of agency growth and development at Guardian said, “Across industries, we need to help women overcome the cultural, personal, and industry barriers in order to understand that…sales can be a great fit.” For women who have considered a sales position in the past, three-quarters of them would consider it in the future; suggesting women who have explored a sales opportunity saw it as a rewarding, career. For more information, visit guardianlife.com.
Five Charged in One the Largest Worker’s Comp Fraud Cases
A workers comp fraud scheme that spanned eight years has generated nearly $600 million in fraudulent billings. Doctors got kickbacks for referring thousands of patients for spinal surgeries. California Insurance Commissioner Dave Jones calls it “one of the largest workers compensation insurance fraud cases we have ever seen.” He said, “Injured workers are put at risk when their medical treatment is based on kickbacks and bribes instead of their medical needs.”
“The defendants carried out this elaborate scheme by callously gathering patients, remaining indifferent to patient needs, and greedily lining their pockets with a cut of the cash from taxpayer-funded health care systems,” said David Bowdich, assistant director of the FBI’s Los Angeles Field Office. The California worker’s compensation system and the federal government paid many of the fraudulent claims. In a similar scheme, doctors got illegal kickbacks for referring patients to a Hawaiian Gardens hospital for spinal surgeries.
Under a plea agreement, Orthopedic surgeon Phillip Sobol faces up to 10 years in prison. Defendants who could be sentenced to up to five years include James Canedo, former CFO of Pacific Hospital in Long Beach, chiropractor, Alan Ivar, and health care marketer Paul Richard Randall. Orthopedic surgeon Mitchell Cohen faces up to three years in prison. All defendants must pay restitution to the victims of the scheme, which will be at least $20 million in Canedo’s case.
Dr. Sobol collected $5.2 million in kickbacks; Ivar collected $1.24 million; and Dr. Cohen collected $1.64 million. Together they referred more than 200 patients to Pacific Hospital. As the CFO of Pacific Hospital, Canedo was responsible for tracking payments to doctors as well as keeping track of how many patients doctors referred to the hospital and how much the hospital collected for procedures. He also mediated disputes when doctors claimed credit for the same referrals.
A key play is the former CEO and owner of Pacific Hospital of Long Beach, Michael Drobot. He pleaded guilty in April 2014 for billing hundreds of millions of dollars to workers’ compensation insurers and the Dept. of Labor. The procedures were on patients who had been referred by dozens of doctors, chiropractors, and others who were getting illegal kickbacks. Conspirators typically paid a kickback of $15,000 for a lumbar fusion surgery and $10,000 for a cervical fusion surgery. Some patients lived hundreds of miles away from Pacific Hospital, and closer to other qualified medical facilities. From 2005 to 2013, Pacific Hospital billed insurers more than $580 million for spinal surgeries on over 4,400 patients. Insurers paid the hospital more than $226 million for the surgeries performed as a result of illegal kickbacks.
Bogus contracts were created to hide the kickbacks, such as paying doctors for consulting and billing services that were never done or for rent of office space that was rarely used. Pacific Specialty Physician Management (PSPM) paid doctors up to $100,000 a month for the right to purchase their medical practices−an option that was never exercised. Marketers who introduced doctors to Pacific Hospital had additional agreements with Drobot’s companies. Two other Drobot companies managed mini-pharmacies in doctors’ offices. These mini-pharmacies often increased the doctors’ shares of the insurance claims in return for referring patients to Pacific Hospital. In many cases, they paid the doctors before collecting any money for the medications. They simply wrote off payments as losses when collections fell short.
Randall’s job was to coordinate kickback arrangements and introduce doctors to the hospital CEO, Drobot. Randall pleaded guilty to participating in a similar scheme involving Tri-City Regional Medical Center. The surgeries at Tri-City involved spinal surgery hardware that Randall’s company provided at inflated prices, knowing that the cost would be passed on to insurers. With the proceeds, Randall paid a 5% kickback to Tri-City. He also paid kickbacks of up to $20,000 per surgery to the doctors and chiropractors who referred patients. Randall also paid kickbacks to doctors in return for referring patients for toxicology tests. The scheme resulted in several million dollars in losses to insurers.
The defendants have agreed to cooperate with the government’s ongoing investigation involving dozens of surgeons, orthopedic specialists, chiropractors, marketers, and other medical professionals.
Ventura Agent Pleads No Contest in $2 Million Annuity Scam
Joseph Anthony Mele, 30, of Ventura pleaded no contest to multiple felony counts for ripping off two senior victims for $2 million in an annuity scam. Mele acted as a financial planner for a 93-year-old woman and convinced her to reinvest her existing retirement portfolio with him. In June 2007, he sold her $1.2 million in long-term annuities. Over the seven years, Mele twisted and churned these annuities to get additional commissions under the guise of providing better returns. Mele earned $295,965 in commissions and caused the victim to lose more than $500,000 in surrender penalties. In addition, Mele wrote himself $800,000 in unauthorized checks from the victim’s checking account so he could invest the funds for her. Mele never sent the money to an insurance company, but used it for personal expenses including entertainment, travel, and gambling.
A second victim, a 74-year-old woman, lost $80,000 in surrender penalties, lost premium, and interest, and suffered additional tax liability after Mele convinced her to surrender her annuities early. Department investigators were able to get some insurers to refund surrender penalties for victims once Mele’s scam was revealed.
The department has taken legal action to revoke Mele’s insurance license. The Santa Barbara County District Attorney’s Office is prosecuting this case. Mele faces up to 30 years in prison, restitution of more than $800,000 and fines of $1.6 million when he is sentenced on January 4, 2016 in Santa Barbara Superior Court.
EPIC Named Among Best Places to Work
EPIC Insurance Brokers and Consultants has been ranked number five among the 2015 Best Places to Work in Insurance in the medium employer category (250-999 U.S. employees) by Business Insurance Magazine and Best Companies Group. John Hahn, CEO of EPIC said the company culture focuses on 10 core beliefs: people first, respect, responsibility, adaptability, community, alignment, confidence, innovation, humility, and fun.
NAFA Defends Fixed Annuities
A recent report by Senator Elizabeth Warren (D – Mass.) ignores the benefits of fixed annuities and their growing popularity among consumers, according to a statement by the National Fixed Annuity Assn. (NAFA). NAFA says that Warren’s report contains misstatements and unsupported conclusions about fixed annuities and annuity sales professionals that might create unnecessary worry and confusion for consumers.
Chip Anderson, NAFA’s executive director said, “With only 22% of American workers very confident that they’ll have enough money to live comfortably throughout their retirement, there is a clear need for trusted insurance advisors and products that can generate guaranteed lifetime income. A fixed annuity is the only product that allows people to accumulate retirement savings, protect those savings from market losses, and guarantee income that lasts a lifetime. Fixed annuities offer excellent consumer value and are the only financial product available that provides guaranteed income for life with no downside risk to the client’s principal. They are supported by rigorous and comprehensive regulations that protect consumers and which have resulted in extremely high owner satisfaction rates.”
According to research compiled by NAFA, 99.99991% of annuity customers are satisfied with their purchase. Fixed annuity sales for 2014 totaled approximately $90 billion.
Fixed annuities are insurance products that offer guaranteed interest and the potential for additional interest, declared by the insurance company or determined by the calculation of positive gains in a market index. They guarantee protection of principal and have no market risk because the owners of fixed annuities do not participate in the underlying markets upon which the annuity interest performance is based. These benefits have led to record-high sales in recent years, as a growing number of Americans look for ways to supplement their income to meet a variety of retirement needs.
Senator Warren released the findings from an investigation into how perks and kickbacks create conflicts of interest in the annuities industry. Thirteen of the fifteen companies investigated admitted to offering kickbacks directly to agents or indirectly through third party gift payments, or both. Two of the fifteen leading annuities providers refuse to provide non-cash direct or indirect kickbacks, suggesting it is straightforward, though uncommon, to build a successful advising business without offering such inducements.
“Companies shouldn’t be allowed to offer expensive vacations, prizes, and other kickbacks to agents in exchange for selling costly, second-rate investment products to unsuspecting customers. This investigation highlights the need for a strong conflict of interest rule to protect the savings of families trying to save for retirement and to ensure a level playing field for companies and advisers who want to do right by their clients,” Senator Warren said. The following “key findings” of the report do not address her statement that fixed annuities are “second-rate investment products:”
- The vast majority of companies investigated admitted to providing rewards and inducements, such as expensive vacations and other prizes, to annuity agents in exchange for sales.
- Annuity companies also create conflicts of interest and evade some existing restrictions by offering perks and inducements to annuity sales agents through third party marketing organizations.
- Current disclosure rules are inadequate to ensure that customers are informed about the incentives agents receive for selling them specific financial products.
- Existing rules and regulations to deter conflicts of interest are completely inadequate.
“Because of loopholes in the law, it is perfectly legal for some advisers to steer customers into complex financial products that will earn the highest rewards, perks, and prizes for the advisers even if they are bad options for their customers. Research suggests that this loophole costs Americans an estimated $17 billion every year. In order to protect consumers from these types of abuses, the Department of Labor has proposed a draft rule to put an end to these conflicts of interest by closing these loopholes,” she said. For more information, visit nafa.com.
Total Annuity Sales Improve 4% in the Third Quarter
U.S. annuity sales totaled $60.6 billion in the third quarter of 2015, improving 4% compared to the prior year, according to LIMRA. Despite high volatility, a significant market correction, and lower interest rates, total annuity sales recorded positive growth in the third quarter. Driving sales are strong fixed-rate deferred and indexed annuity results, according to Todd Giesing, assistant research director, LIMRA Secure Retirement Research. “There was definitely a flight to safety with every fixed product except fixed immediate and structured settlement annuities recording positive growth,” he said.
For the first nine months of 2015, total annuity sales were 2% lower than prior year. The market volatility hurt variable annuity (VA) sales, which fell 7% in the third quarter. Year-to-date, VA sales dropped 4% year over year. Nineteen of the top 20 VA writers reported declines quarter over quarter (the top 20 VA companies write about 93% of VA sales).
There has been a significant shift in VA market share over the past several years, said Giesing. Today, VA sales make up 54% of the annuity business, down from 67% just in 2012. This decline in VA market share has contributed to the growth in the indexed annuity market. The VA election rate for GLB riders (when available) was 78% in the third quarter. This is one percentage point higher than prior quarter and prior year.
Sales of fixed annuities increased 21% in the quarter. In the first nine months of 2015, fixed annuity sales increased 2%. Despite the decline in rates, fixed annuity writers have been able to offer competitive rates. Coupled with the equity market volatility, we believe the safety of fixed products is being seen as a safe haven, noted Giesing.
Indexed annuity reached record-breaking levels. Total sales were up 22% and 10% higher than the previous best quarterly results. This growth was driven by many companies, rather than just the top players as we have seen in the past.
While all channels are seeing growth in indexed annuity market, the bank channel has experienced remarkable growth. Bank sales of indexed annuities now represent 18% of sales, up from 6% in 2011. The Institute credits this growth to product innovation ─ companies have developed simpler products, without GLB riders, as an alternative to bank CDs.
Year-to-date, indexed annuity sales rose 7%. The election rate for indexed annuity GLBs (when available) dropped 8% from prior quarter to 60%. Institute researchers say that the increase of bank sales’ market share (which tend to be sold without GLB riders), and more consumers’ shifting priorities (from income generation to principal protection) seeking safety from recent market volatility contributed to the decline.
Sales of fixed-rate deferred annuities rebounded in the third quarter, improving 32%. Year-to-date, fixed-rate deferred sales were nearly flat compared to prior year, totaling $23.1 billion. Despite lower interest rates, single premium immediate annuity sales were flat in the third quarter. Total SPIA sales were down 12% for the first three quarters of 2015.
Deferred income annuity (DIA) sales grew 2% compared to the third quarter of 2014. Year-to-date, DIA sales dropped 7% from prior year. LIMRA is seeing market share spread out among the top ten writers and anticipates DIA sales to increase at a slow, steady pace for the foreseeable future. For more information, visit limra.com.
Free ACA Compliance Tools for Consumers
TurboTax is offering a suite of free online tools to help taxpayers evaluate their health insurance choices under the Affordable Care Act. For more information about open enrollment, the free TurboTax tools and additional tax tips, visit blog.turbotax.intuit.com.
Paychex Expands Its Private Exchange Offerings
Paychex is offering new tools and resources through the Paychex Insurance Agency (PIA) Personal Marketplace. The Personal Marketplace offers a convenient way for employers who are not required to offer a group plan under the Affordable Care Act (ACA) to help their employees gain access to coverage, and avoid increasing penalties for non-coverage under the ACA’s individual mandate to purchase health insurance. Individuals will have convenient access to benefit options, decision tools, and cost estimators for private and tax credit-eligible health plans. My Thrive Score will give consumers a personal credit score for their health and financial security, providing a view of four key cornerstones of their lives: health, income, assets, and future savings. The newly enhanced Genie employer administration portal will make it easy for businesses to give employees access to flexible, low-cost benefits by helping them shop for and enroll in individual health insurance, including private insurance plans and plans eligible for a tax credit. Employers can also manage automated employee communications. For more information, visit ConnectedHealth.com.
Nationwide is making its Investment Solutions Builder (ISB) tool more efficient. The ISB tool is a web-based investment tool that allows registered investment advisors (RIAs) to build and manage retirement plan fund lineups and asset allocation models for plan sponsors and participants online. RIAs can now manage core fund lineups and asset allocation models across all of their plans simultaneously. For more information, visit nationwide.com.