Hyper-Growth Expected for Private Exchanges
Hyper growth in private exchanges is projected to continue through 2018, according to a report by Accenture. Six million people enrolled in a private health insurance exchange for the 2015 plan year, continuing a remarkable adoption trend that exceeds 100% annual growth since 2013. The mid-size employer segment of 100 to 2,500 employees is driving initial growth with the expansion of the consultant-led exchanges servicing this market.
Accenture expects enrollment to grow for employees under 65 and dependents to 12 million in 2016 and 22 million in 2017.Accenture expects growth to remain on track to reach 40 million enrollees by 2018.
Two key factors that limit private health insurance exchanges will dissolve in the near term: a lack of mature solution providers and adoption delays among large employers. Private health insurance exchange adoption has been constrained by a lack of mature solution providers that can meet market demand. As the market and service providers mature, adoption rates of private health insurance exchanges are expected to accelerate.
Technology vendors in the mid- and larger market segments are emerging players. These startup-like companies have capital and resource constraints that inhibit the rapid deployment of their platforms. During this first wave of private exchange rollout, large scale rollout successes have been limited to more mature market players operating with the scale needed to serve their customers (national benefit consultant exchanges).
Few technology providers have emerged in the small employer market (100 employees or fewer). There has been a reluctance to compete with public Small Business Health Options Program (SHOP) exchanges. However, enrollment has been well below expectations for these public small group exchanges. The door may now be open for new commercial alternatives to provide an exchange experience for small firms.
These capacity constraints will erode as exchanges see continued consolidation (e.g., acquisition of bswift), capital investment (e.g., equity investment in Benefitfocus), and organic growth.
Many large employers have been reluctant to be early adopters of private health insurance exchanges. The standardized solutions that most exchanges offer are not aligned with traditional employer offerings. Highly customized benefit designs have been important to large employers. The complexities of the exchange selection process have taken some prospective buyers by surprise with new options, such as defined contribution, implementation, and ongoing benefit administration. Others are wary of regulatory uncertainty and evolving requirements. Risk-averse employers want proof of savings. They also want to see the enhanced customer experience that’s been touted by leading exchange sponsors.
New entrants are designing specialized exchange models to meet employer demands. For example, single-carrier exchanges now offer more customizable plan designs. Sponsors are enhancing implementation and change management services and back-end benefit administration.
Employers face increasing administrative requirements under the Affordable Care Act (ACA), such as new minimum essential coverage reports due to the IRS (section 6055). These requirements add to an already substantial compliance workload (ERISA, HIPAA, COBRA). Private health insurance exchanges can significantly reduce these requirements with reporting and compliance services.
The employer mandate will compel employers to revisit their benefit strategy. Coupled with lower than expected SHOP enrollment, more smaller firms may consider private exchanges for a simpler path to comprehensive and compliant coverage.
Many employers have not dropped coverage altogether, as some initially forecast. In fact, most employees view health insurance as a critical employer-provided benefit. Seventy-six percent of consumers see health insurance as the primary or an important factor in staying with their employer. As employers seek a compelling alternative, the private exchange model of reducing costs and administrative burden emerges as a clear favorite.
The 40% excise tax on high-cost plans, “the Cadillac tax,” will go into effect in 2018. This could affect as many as 38% of large employers and 17% of all American businesses if insufficient action is taken. Private health insurance exchanges will provide an ideal alternative to these legacy high-cost plans. They will give employees new options to manage their health. Accenture expects private exchange enrollment to spike in 2017 as employers look to avoid these looming penalties. Employers’ drive to meet consumer expectations will lead to 40 million members on private exchanges by 2018. For more information, visit accenture.com.
Missing Part B Enrollment Is a Costly Mistake
Too often, people delay or decline Part B enrollment because they are not aware of their rights and obligations, said Joe Baker, president of the Medicare Rights Center. Those who don’t enroll in Part B in a timely manner may face gaps in coverage, lifetime premium penalties, and disruptions in needed care. Costly and disruptive Medicare enrollment mistakes are increasingly common and deserve the attention of federal lawmakers, Baker said.
The Medicare Rights Center released its Medicare Snapshot: Stories from the Helpline, spotlighting the complexities of navigating Medicare enrollment. Every day, 10,000 Baby Boomers are turning 65 and becoming eligible for Medicare. Retirees and people with disabilities are often unaware of the rules of enrolling in Medicare.
The Medicare Snapshot outlines the following needed improvements to the Medicare enrollment process:
- Better notice for newly eligible Medicare beneficiaries.
- Enhanced support for employers and other messengers.
- Streamlined Medicare enrollment periods.
- Expanded avenues for recourse.
The Medicare Snapshot offers this advice for those approaching Medicare eligibility:
- Consider all your options before you become Medicare-eligible. Start thinking about Medicare enrollment six months before you become eligible.
- If you have employer-sponsored health coverage, consider whether to enroll in or delay Medicare Part B depending on the size of your company and whether Medicare will be your primary coverage.
- Make an appointment to speak to a representative at your local Social Security office about your circumstances after you have done some basic research.
- Write down what you are told by the Social Security representative; confirm that you understand the information; and keep a record of all conversations.
- If you are going to enroll in Part B, do so early in your initial enrollment period so that you do not face a delay in coverage.
- If you are in an unusual circumstance, don’t assume that you understand how the general rules apply to you. Explain your circumstance to a counselor and ask questions.
- For additional help, beneficiaries and caregivers can visit Medicare Rights’ informational website at www.medicareinteractive.org or call the national helpline at 800-333-4114. Other resources include 1-800-Medicare and the State Health Insurance Assistance Program (SHIP).
Why Exchange-Only Health Plans Are More Expensive
Average premiums of exchange-only health plans are not as competitive as premiums of health plans that are sold both on the exchange and off the exchange. Only a small percentage of metal plans are distributed exclusively through government exchanges, as opposed to being distributed on and off-exchange. The insurance companies offering the exchange-only health plans are various Blue Cross Blue Shield entities as well a CO-OP health insurance company. For every one exchange-only metal plan within the government dataset, about 29 metal plans are offered on and off the exchange.
Higher premiums for exchange-only plans are found across the Bronze, Silver, and Gold health plan categories of Affordable Care Act health insurance, according to a study HealthPocket. The biggest difference in average premiums is for Bronze plan health insurance. The exchange-only Bronze plan premiums average about 15% higher than premiums for Bronze plans sold on and the off-exchange. Exchange-only Silver plans are nearly 7% more expensive than their on/off exchange competitors; and Gold plans are about 5% more expensive. Data is not available for exchange-only platinum health plans.
Kev Coleman, head of Research & Data at HealthPocket said, “Health plans sold on-exchange are not paid for at list price by most enrollees but, often have sizable premium subsidies applied. Off-exchange consumers are more likely unsubsidized and may be more price sensitive than on-exchange consumers who enjoy premium subsidization.” For more information, visit HealthPocket.com.
The Cadillac Tax Is Causing Employers to Eliminate HSA Contributions
Many employers with plan costs close to the Cadillac Tax threshold are eliminating payroll contributions to HSAs to avoid incurring excise tax liability, even though many HSA-qualified plans are likely to avoid the tax for years, according to a study by The American Bankers Assn through its Health Savings Accounts Council and HSA Consulting Services.
In a recent letter to the IRS, the HSA Council said that employee contributions should be excluded from the excise tax calculation. HSA plans have proven effective in increasing health and wellness behaviors while decreasing healthcare costs and enabling Americans to save for healthcare and retirement expenses, according to the Council.
Kevin McKechnie, executive director of ABA’s HSA Council said that many HSA-qualified plans are expected to remain under the initial Cadillac Tax threshold, but employers in expensive states or with expensive plans may incur tax liability in 2018. The tax is calculated monthly. Employers who contribute large amounts in one month to help employees seed accounts may need to spread contributions over a plan year in order to avoid the tax.
There is a very large premium variance among states. HSA plans in Connecticut are likely to be affected right away while Iowa plans appear to be safe for years to come.
Todd Berkley, president of HSA Consulting Services, the author of the study said, “We initially set out to prove that HSA plans would steer clear of the tax, but are dismayed to find some plans will be hit right away if payroll contributions are counted. While many HSA plans will likely be a safe haven for now, like the AMT, this tax will eventually affect every plan in America, including HSA plans.” For more information, visit aba.com.
Most Health Plans Offer Chronic Care Management
Programs to help patients manage chronic diseases, such as diabetes and asthma, have become standard in health plans, according to a RAND study. Published in the latest edition of the American Journal of Managed Care, the study found that all plans offer programs to support members with chronic conditions. Plans typically identify these members based on claims and laboratory data, and match them to interventions and resources based on need and risk. While these programs improve care and reduce cost, they are underutilized. Plans are moving toward integrating information from electronic medical records and embedding health plan staff into medical practices. Most of the case study plans are looking to adopt patient-centered medical home models to provide better continuity of care. For more information, visit rand.org/newsletters.html.
Insurance Industry Adds 5,100 Jobs in April
The insurance industry added 5,100 jobs in April, according to the Bureau of Labor Statistics. The insurance industry grew 0.20% in April at 2,533,000 employed insurance workers with an unemployment rate of 2.2%. Over the past 12 months, the number of employed insurance workers has increased 84,900 or 3.26% from 2.44 million in April 2014. Insurance carriers and related activities made up the bulk of job growth within the finance and insurance sector, which grew by 9,500 jobs. Over the past 12 months, the insurance carriers and related activities subsector contributed 75.8% or 84,900 jobs. For more information, visit InsuranceJobs.com.
Affordability Is a Key Issue for Dental Plans
A survey by SmileIndex reveals a big gap in the affordability of dental insurance. People who have dental insurance tend to be younger, married with children, have a Bachelor’s degree, and make $50,000 or more. Seventy-five percent of survey respondents making $50,000 to $99,000 have dental insurance as do 85% of those making more than $100,000. Only 39% of those making less than $25,000 have dental insurance. The survey was conducted on behalf of DentalPlans by Infosurv Research. Fifty-eight percent of respondents without dental insurance say it’s not affordable; 21% say their employer doesn’t offer it; and 15% say it’s not necessary. Only 23% of respondents say they would seek low or no cost alternatives to dental insurance. For more information, visit dentalplans.com.
Enrollment in Individual Health Plans Up 47% in 2014
In California, coverage in the individual market expanded in historic proportions in the first year of the ACA, according to a report by the California HealthCare Foundation. At the same time, group coverage shrank, but the size of the employer-sponsored health insurance market remains to be seen. The number of people purchasing health insurance on the individual market surged in 2014, according to enrollment figures released recently by the two state health insurance regulators.
The impressive gains in the individual market are fueled by implementation of the Affordable Care Act (ACA) in California, premium assistance for low-income people, guaranteed coverage for people with pre-existing conditions, the federal requirement for people to maintain health coverage, and an extensive outreach effort aimed at boosting enrollment.
The new California data emerged as a result of AB 1083, enacted in September 2012, which requires the California Department of Insurance (CDI) and the state Department of Managed Health Care (DMHC) to publicly report year-end enrollment figures for all the health plans and insurers they regulate.
The reported data show that 2.2 million Californians got health coverage through the individual market in 2014. This is an impressive one-year increase of 47% — nearly 700,000 additional enrollees. About half of those with individual coverage in 2014 bought plans through Covered California, where 90% got a tax credit toward their premium costs. The other half of individual policyholders bought coverage directly from insurance companies without premium assistance. Following the 2014 expansion, California’s individual market is now larger than the small group market.
Group coverage is still the main channel for commercial health insurance. About 11.8 million Californians had group coverage at the end of 2014. The group market shrank 5% to more than a half-million people. The most pronounced shift is in the small-group market, which shrank 11% in 2014.
The group enrollment figures provide a partial picture of employer-sponsored insurance because employers may self-insure instead of buying coverage from an insurer. Regulators reported 6.4 million people covered by Administrative Services Only (ASO) arrangements for self-insured employers, in which the employer bears the direct financial risk of paying all claims, but relies on an insurer or health plan to administer the coverage. The combined total of group coverage and ASO-administered enrollment represents much but not all of self-insured enrollment. ASO figures don’t capture people insured through third-party administrators or multiple employer welfare arrangements. Self-insured plans (including ASOs) are authorized and regulated by federal not state law.
DMHC now regulates the largest portion of enrollment in all three commercial markets, with 82% of the individual market, 77% of the small-group market, and 91% of the large-group market. In prior years, CDI was the predominant regulator of the California individual health insurance business. For more information, visit chcf.org.
Covered California Caps Specialty Drug Costs
Covered California is the first health exchange in the nation to adopt benefit design changes to improve access to high-cost specialty drugs. The Covered California Board approved the last in a series of changes, which will take effect in 2016. The improvements come after months of meetings among exchange leadership and consumer organizations, stakeholders, carriers and regulators to determine what is in the best interest of all Covered California consumers.
The vast majority of Covered California consumers will see their specialty drugs capped at $250 per month, per prescription. The caps will range from $150 to $500. Because of Covered California’s standard benefit design, they must be offered by every health plan in the individual market and by all plans offered by the exchange.
The cap will reduce the monthly out-of-pocket costs for consumers so that enrollees pay less each month. Before the changes, consumers who needed these medications were forced to spend their entire maximum out-of-pocket costs — sometimes thousands of dollars — in their first few months of coverage. Covered California has made these changes:
- Plan formularies must include at least one FDA-approved drug in tiers one, two or three under certain conditions.
- Plans must have an opt-out retail option for mail order.
- Plans must provide enrolled consumers an estimate of the out-of-pocket cost for specific drugs, and include a statement on the availability of drugs not listed on the formulary.
- Plans must include an exception process written clearly in their formulary and a dedicated pharmacy customer service line where advocates and prospective consumers can call for clarification.
Covered California has also made it easier for consumers to access the health care services they need by adding a specialist visit, without being subject to a deductible, for those in the Bronze plan. Covered California has also removed the application of a deductible for other needed services, such as lab tests, rehabilitation and others. Covered California’s Silver plan will be simplified by combining copay and coinsurance into a single product. Every doctor visit, lab test and prescription will not be subject to a deductible in this single product. For more information, visit CoveredCA.com.
Covered California’s Proposed Budget for 2015 to 2016
Covered California unveiled its proposed budget for fiscal year 2015 to 2016.
The proposed budget will be reviewed and revised before being finalized by the Covered California Board of Directors in June. It calls for Covered California to start the new fiscal year with nearly $200 million in unrestricted reserves and the ability to use $100 million in federal establishment funds to complete its initial launch. In fiscal year 2015 to 2016, Covered California will transition to relying solely on the fees it collects from health insurance companies and the extensive reserves it has saved while using federal funds.
The proposed budget for fiscal year 2015 to 2016 is about $58 million less than the fiscal year’s projected expenditures. This is because many of the startup expenses required during Covered California’s opening days are no longer needed, such as the information technology build and some of the outreach, education and marketing expenses. This 15% reduction is part of Covered California’s managed launch and is consistent with the exchange’s vision that it would always need to spend more in the early years to lay the foundation for this historic effort.
Other highlights in the proposed budget include the following:
- Fiscal year 2015 to 2016 marks the year Covered California transitions from using federal establishment funds to ongoing self-sufficiency.
- Thanks to an extension from the federal government, Covered California anticipates having about $100 million in federal funding to spend in fiscal year 2015 to 2016. Spending will be in accordance with federal rules that allow marketplaces to use grant funds for establishment costs for design, development and implementation, but not to support ongoing operations.
- While Covered California continues to use federal grant establishment funding, the exchange is streamlining operations and banking the fees collected from contracted health plans to ensure the exchange’s ongoing financial health.
- This budget calls for ending fiscal year 2015 to 2016 with nearly $194 million in unrestricted reserves — more than six months’ worth of operating funds. Covered California has a positive operating balance, and it projects having more than $150 million in reserves as of the beginning of fiscal year 2017-2018.
- Covered California will increase the role of staff and public employees.
- Covered California will maintain its positive balance sheet by relying less on contracted services and more on state personnel.
- The health insurance premiums that will be collected during the 2015 coverage year are an estimated $6.5 billion.
- Covered California’s enrollment of 1.4 million consumers is in the range of the low and medium projections (1.3 million and 1.7 million) prepared in early 2014. The lessons from real-world experience are sharpening projections going forward. For example, the new enrollment Covered California achieved during the second open-enrollment period — more than 495,000 new enrollees — is almost exactly the forecast medium figure of 500,000. Lessons learned relating to the percentage of those who select a plan and then pay their premium, and the rate at which people renew and maintain their coverage, informed the updated enrollment projections used in the budgeting process. The most important adjustment to the enrollment forecasts is based on low (70%), medium, (75%) and high (80%) projections for the portions of subsidy eligible consumers who will enroll by the end of the 2018.
- This budget calls for making ongoing substantial investments in marketing and outreach, and working with agents and others, to make sure that consumers know Covered California is here for them.
The document Proposed Fiscal Year 2015 to 2016 Budget is available at CoveredCA.com/financial-reports.
No-Cost Chronic Illness Accelerated Death Benefit Rider
American International Group is offering a no-cost chronic illness accelerated death benefit rider on three quality of life insurance products issued in California. The rider is now attached to “QoL Index Plus II,” “QoL Guarantee Plus” universal life insurance, and “QoL Flex Term” life insurance policies issued in the state by American General Life Insurance Company. The chronic illness accelerated death benefit rider allows the owner to accelerate some or all of the insured person’s base life insurance benefit if the insured is certified as having a chronic illness, as defined under the rider. The money may be used for any purpose, including supplemental income, medical expenses, or long-term care. Coverage is reduced by the amount of death benefit accelerated, which may also reduce the amount of premiums required to keep any remaining benefit in force.
Accelerated benefits payable under the rider may be received as a lump sum, as annual payments for a fixed period of time (not to exceed 24 months), or as monthly payments for a fixed period of time (not to exceed 24 months). The maximum amount of life insurance death benefits that may be accelerated for an insured person under all accelerated benefit riders on the QoL policies is the lesser of the existing amount of the death benefit or a lifetime maximum of $1,500,000. For more information, visit qualityoflifeinsurance.com.
Health Net Hires Senior Vice President
Health Net, Inc. has hired Andy Ortiz as senior vice president, Organization Effectiveness and chief people officer. “Andy was a valued member of our leadership team from 2002 to 2008, and we are delighted to welcome him back to Health Net,” said Jay Gellert, president and chief executive officer of Health Net. “Andy will be instrumental in helping us continue focusing on the development of our associates and making Health Net a great place to work.” Most recently, Ortiz was chief human resources officer at Western Dental Services/Brident, where he led all aspects of human resources, including workforce planning, recruitment, compensation and benefits, performance management, employee relations and engagement, change management, and employee and leadership development.
Ortiz received a master’s degree in organizational leadership from Woodbury University and a bachelor’s degree in speech communication from California State University, Fullerton. He holds a certified executive coach certificate from the Hudson Institute of Coaching and he is a member of the International Coaching Federation. Ortiz will succeed Karin Mayhew, who is retiring after 16 years at Health Net.
- No lifetime benefit maximum
- No waiting period
- Easy enrollment options
- Payroll-deducted premiums
- Simple product design – no categories for critical illnesses
- HSA compatibility
- New re benefit options
- New issue age, attained rate, and composite rate options
- Claims that can be submitted online
For more information, visit Transamerica.com.
Interactive Retirement Planner from Nationwide
Nationwide’s retirement plan participants can now create personalized retirement income simulations using the new My Interactive Retirement Planner. The free online retirement calculator incorporates a participant’s real-time account data. Nearly 6% of users decide to increase contributions with an average increase of 3.6%, which is significantly above the industry average. The new My Interactive Retirement Planner tool helps participants understand how they are doing with their retirement goals, and models changes to help reach their goals. Employees can update their contribution amount directly from the tool or use their personalized results to start a more informed conversation with their advisor. For more information, visit nationwide.com.
Forethought Life Insurance Company, a subsidiary of Global Atlantic Financial Group Limited, has enhanced its “ForeRetirement” variable annuity suite with the launch of “ForeRetirement III.” The new variable annuity builds on the success of its predecessors with additional daily withdrawal benefit options, an expanded investment platform, and greater flexibility in balancing guarantees and growth potential. With ForeRetirement III, advisors can offer more choice and customization for clients to develop a much more personalized approach to retirement, said Jason Bickler, National Sales Manager for annuity broker/dealer distribution. For more information, visit forethought.com.
Life Insurance Educational Tool
Legal & General America has launched a digital experiment, HowToBuyLifeInsurance.com. It’s a website designed to be an educational tool for people to learn more about life insurance and get a ballpark price range on what term life costs. HowToBuyLifeInsurance.com addresses the three main questions on a consumer’s mind: Why do you need life insurance? How much do you need? How much does it cost? By experimenting with ways that they can approach consumers and bring them along a digital path that is engaging, informative and non-threatening, Legal & General America hopes to create interest among the disinterested and action among those who are aware of their need but paralyzed by confusion and disenchantment. Legal & General America hopes to find ways to attract potential buyers who wouldn’t otherwise be reached … those who have been ‘on the fence’, or unaware of a significant risk they face without life insurance coverage.
Legal & General America has partnered with SelectQuote Life to fulfill the needs of customers who come through HowToBuyLifeInsurance.com. Senior vice president of Sales and Marketing Frank Gencarelli explained, “The real return from this experiment isn’t the life insurance we sell while conducting it, but what we learn about what works (and what doesn’t) in the mission to create demand among the uninsured.”