Insurers Focus on Off-Exchange individual Market

individualhealthplansMany health insurers are turning their attention to off-exchange individual plan membership as more consumers withdraw from the exchanges, according to a report by Mark Farrah Associates. Although 4.9 million new members enrolled the exchanges in 2016, individual market enrollment declined 1%. Anthem, UnitedHealth, Aetna, Health Care Service Corporation (HCSC), Humana and Kaiser lead the industry in this segment. Each had more than a million individual medical covered lives in the first quarter of 2016.


Growing concerns about sustainability have motivated some insurers to pull out of the exchanges. Citing high medical costs, Unitedhealth said it would operate in only a handful of exchanges in 2017. In June, Humana announced that it would pull out of many exchanges after a year of seeing nearly $1 billion in losses. In August, Aetna announced that it would sharply reduce its participation in the public Marketplaces next year. Several Blue Cross Blue Shield plans and regional competitors have also announced intentions to scale back. Insurers lost almost $6 billion in the segment last year. Sixty-nine percent of the 194 companies that filed the 2015 Supplemental Health Care Exhibit had aggregate net losses in the individual, non-group segment. Factors include high medical claims, adverse selection, challenges with reinsurance, risk corridors, and risk adjustment, immature risk pools, and under-enrollment of younger, healthier individuals.

Still, Marketplace advocates maintain that the ACA is in its formative years and that new companies will enter markets as others exit. The Marketplace shakeout will continue as companies withdraw and enter new exchange markets. Meanwhile, insurers are working to firm up rates for 2017 individual plans and gear up for open enrollment beginning November 1, 2016.

Sixty-three percent of the 20.2 million individual medical members were enrolled through the Marketplace as of March 2016. The remaining 37% were enrolled in off-exchange plans, according to the Centers for Medicare & Medicaid Services (CMS) reports and data from Mark Farrah Associates. As for the future of Obamacare. Some say that the program is unsustainable and will collapse while others say the program can learn from its mistakes and secure a solid footing. The upcoming presidential and congressional elections will strongly influence Obamacare’s future, according to the report. For more information, visit

Profits Plummet for Leading Health Plans
The majority of leading health plans saw reduced profitability in first the quarter of 2016 compared to the first quarter of 2015. On one hand, health plans saw increased enrollment in their exchange business. But the ACA also brought financial losses. Affecting profitability was the volatility in financial markets, investment losses, costs associated with pending acquisitions, and health reform regulations, according to a report by Mark Farrah Associates (MFA). MFA reviewed enrollment and financial trends of Aetna, Cigna, Health Care Service Corporation (HCSC), Humana, Kaiser Permanente, UnitedHealth Group, and Anthem.

Membership increased 1.3% for the leading U.S. health insurance plans from the first quarter of 2015 to the first quarter of 2016. Enrollment increased 1.4% in administrative services only (ASO) funding arrangements and 1.2% in fully insured business.

In the first quarter of 2016, four of the seven companies had enrollment gains in the fully insured business, ASO, government segments, and commercial markets. However, several top health plans had membership losses and less than favorable profit margins. As of March 31, 2016, enrollment figures were mixed in risk-based and self-funded medical membership.

.UnitedHealth, Aetna, Humana, Anthem and Cigna will be pulling back exchange business for 2017. An inadequate risk-pool program is one reason why many health plans are withdrawing from the exchanges. UnitedHealth maintained its leading position with 39.4 million members, a 1.73 million increase from 37.7 million in first quarter 2015. United’s risk-based enrollment increased 7.5% to 17.6 million members, compared to 16.4 million in first quarter prior year. UnitedHealth earned $1.8 billion on total revenues of $35.9 billion. The company’s profit margin declined 11%. A reason for the decline is public exchange performance.

The company says that enrollment increases are due to growth in services to mid-sized employers, small groups, and individuals. Exchange participation contributed to membership growth for UnitedHealth in the first quarter of 2016. But the company reported financial losses from exchange business and announced that it will exit nearly all exchanges in 2017.

Anthem reported a 3.5% profit margin in the first quarter of 2016, down from 4.5% a year ago. The company cited increased losses from investment activities, costs incurred associated with the pending acquisition of Cigna, and higher interest expense. Anthem had the second largest gains in the first quarter of 2016 with an increased enrollment of about 1.07 million medical members. As of March 31, 2016, Anthem’s medical membership grew 3%, from the first quarter of 2015. Much of Anthem’s membership growth was due to increases in its Medicaid, Blue Card, and National Accounts businesses. Anthem included about 5.6 million BlueCard members in enrollment reporting. (There may be some double counting due to sharing national accounts across Blue plans).

Cigna had a 3% increase in medical members in the first quarter of 2016. Cigna attributes its enrollment increase to strong sales in the middle market, select segments, and government business.

Kaiser Permanente’s revenues increased over 5% from the first quarter of 2015. It had the most significant decrease in profit. Operating margin declined to 3.1%, from 6.8% in the first quarter of 2015. Kaiser had a decrease in net income, partly due to volatility in financial markets and investment losses. But the company remains confident with growing operating revenues and enrollment. Kaiser had 5.6% enrollment growth in the first quarter of 2016, reflecting a 5.7% increase in risk-based membership. The company attributes much of that enrollment growth to its individual, group, and government segments. Kaiser remains focused on acquisitions and key business investments to sustain customer retention and grow membership.

Humana, Aetna, and HCSC saw membership declines. Humana had a 4.1% decline in total risk-based membership and 4.3% decline in ASO enrollment. This was due, partly, to the loss of individual commercial members. There has been lower membership in non-ACA compliant business. Membership losses can also be blamed on discontinued ACA-compliant plans and the loss of some large group ASO accounts. In the first quarter 2016, Aetna’s medical membership was about 22.4 million, reflecting a decrease of 805,000 members from the prior year. The company attributed its membership losses to its commercial insured products, which were offset partially by growth in government business. Aetna had a 4.3% decline in profit margin, from 5.3% in first quarter 2015 to 5.1% in the first quarter of 2016, also partially attributed to pressure on its exchange business. For more information, visit

Experts Predict Sharp Decline in Competition in Exchanges Outside California
An analysis by Avalere reveals that unsustainable financial losses are making several large national and regional issuers scale back or withdraw from the exchange market. Nearly 36% of exchange market rating regions are expected to have only one participating insurance carrier for the 2017 plan year. There may be some sub-region counties where no plans are available. Nearly 55% of exchange market rating regions will have two carriers or fewer. Seven states will have only one carrier in each rating region (AK, AL, KS, NC, OK, SC, WY).In 2016, only 4% of rating regions had only one participating carrier while 33% had two carriers or fewer.

California is in much better shape than other states. Eighty-nine percent of the state’s rating regions have more than two carriers, 11% have two carriers, and 0% have only one carrier.

“Depending on where consumers live, their choice of insurance plans may decrease for 2017, Some exchange enrollees may need to choose another insurance plan in order to maintain coverage,” said Elizabeth Carpenter, senior vice president at Avalere.

“Lower-than-expected enrollment, a high cost population, and troubled risk mitigation programs have led to decreased plan participation for 2017. Congress and the Administration can choose to stabilize these markets and re-establish competition—but only through a consensus process that brings in a broader swath of the uninsured,” said Dan Mendelson, president of Avalere.

Avelere suggests the following to boost competition in the exchanges:

  • Improve market stability through enhanced risk mitigation programs, including changes to the risk adjustment transfer formula and permanent reinsurance.
  • Change enrollment rules to minimize adverse selection, including tighter special enrollment period standards, lock-out periods for consumers who delay enrollment, reforms to the 90-day grace period for individuals receiving exchange subsidies, and incentives to encourage enrollees to maintain continuous coverage.
  • Encourage more individuals to enroll in coverage to grow the risk pool, including additional funding for outreach, enhanced or reformed subsidies, or stronger mandate standards.
  • Introduce new insurance products or market rules to make exchanges more attractive to younger, healthier individuals, including changes to the age rating provisions, new and/or lower-cost plan options, or expanded eligibility for other public programs (Medicare or Medicaid).

For more information, visit

Proposed Silver Exchange Premiums Jump
An analysis from Avalere finds that 2017 premium increases vary significantly by geography, but they are going up for the most part. Likely contributors to premium growth are lower-than-expected exchange enrollment, higher enrollee healthcare costs, and the end of the reinsurance and risk corridor programs, according to the report. Proposed premium increases average 11%, but consumers can select lower cost Silver plans, which are set to increase only 8%. “Exchange consumers have been active shoppers who tend to re-shop each year and gravitate toward lower premium plans. As in previous years, many enrollees will limit their premium increases by selecting plans with smaller premium increases and taking advantage of premium subsidies,” said Caroline Pearson, senior vice president at Avalere.”

While rates can come down dramatically between proposed and final filings, Avalere analysts say premium increases in 2017 appear to be higher than in 2016. An Avalere analysis conducted at a similar point in the rate filing process in 2016 found much smaller proposed premium increases.

Proposed premiums for the lowest cost Silver plans in Connecticut, D.C., and Oregon are up more than 15%. But proposed premiums are down for the lowest cost Silver plans in Washington State and Rhode Island. Rhode Island is the only state with lower average proposed Silver premiums for 2017. Rhode Island’s highest cost issuers are exiting the market for 2017, and one of the remaining issuers is offering lower cost options.

Private Insurance Models Shake up Global Healthcare Industry
The private healthcare insurance industry is becoming increasingly relevant following the World Health Organization’s push for universal health coverage. The private insurance market is an extremely attractive destination for investors because of a vast uncovered global population, along with inadequate government funding. China, India, Brazil, Russia, and Mexico are expected to draw substantial investments due to their high out-of-pocket costs and private healthcare expenditures.

North America is the largest private health insurance market, accounting for more than two-thirds of the global private insurance premium revenues, or $1.07 trillion in 2015. Europe is a distant second with $189.54 billion, followed by Asia-Pacific with $124.07 billion, Latin America with $30.78 billion, and Africa with $1.43 billion.

The developed regions are providing incentives healthy behavior with freebies and are rolling out e-Commerce initiatives. Developing regions are increasing insurance familiarity and coverage with disease- insurance products and insurance add-ons.

A global trend is the integration of care delivery. Insurers are keeping pace with the changes by using the services of start ups. Adjunct insurance sectors are turning to community and crowd-sourced insurance, adding a fresh dynamic to the global market.

These large-scale transformations are forcing the health insurance industry to evaluate its business models, policy holder engagement, and plan structures. The major disruptions in private insurance are consumerism, big data and analytics, chronic disease prevention management, online health tools, and value-based compensation. The most important changes are consumerism and a transition to value-based compensation because they compel insurers to alter their operational methods.

Health insurance innovations are aimed more at saving money and improving efficiencies than about customizing products or increasing access and awareness of the market. The developed markets emphasize cost reduction while the others focus on expanding coverage.

In the long term, most global health insurers will harness big data to eliminate inefficiencies, help them make decisions, and design profitable products and services. Wearables, telehealth, mobile payments, data-security, and other cutting-edge technologies will play a huge role in the global insurer market. For more information, visit

ACOs Prove Successful in Medicare
The Medicare Shared Savings Program Accountable Care Organizations (MSSP ACOs) continue to generate financial savings while improving care. They do so by fostering greater collaboration among providers, according to a report by The Centers for Medicare and Medicaid Services (CMS). When an ACO achieves high-quality care and reduces above certain thresholds, the participating ACO shares in the savings generated for Medicare.

In 2015, over 400 Shared Savings Program ACOs generated total program savings of $429 million. For example, USMM Accountable Care Partners saved CMS $15.1 million in its first year; it was in the top 20% of money-saving programs in 2015. USMM Accountable Care Partners is the only MSSP ACO dedicated exclusively to the home-limited population in the United States. Robert Sowislo, president of USMM  said, “These early outcomes result from the transformational work that our provider-led teams have initiated in our practices across the U.S. – all with a focus on delivering patient centered care to the home-limited populations we serve.” For more information, visit

Emergency Doctor Slams High Deductible Plans
The president of the American College of Emergency Physicians Jay Kaplan, MD, FACEP released a statement in response to a recent rash of articles on the spikes in price for generic and name-brand pharmaceutical drugs. The following is a summary of his comments:

Consumers are rightly angered by the sudden rise in prices for certain drugs, but what they may not be aware of is the role that the insurance industry has played in transferring health care costs across the board to patients and the physicians who treat them. Prescription drug prices have been exorbitant for a long time, but patients were shielded from it before high-deductible health insurance plans began to proliferate. Those plans, which now account for nearly one-quarter of employer-sponsored health insurance, use words like ‘out-of-network,’ ‘deductible,’ ‘co-insurance’ and ‘co-pay’ to hide an ugly reality: more money coming out of your pocket to pay for your health care. While the price hike for the anti-anaphylaxis drug EpiPen has garnered most of the headlines, other drugs such as insulin, tetracycline, and the prostate cancer drug, Xtandi, have also shot up in price, hurting patients. Vancomycin, an antibiotic that is critical in the emergency department for the potentially deadly infection clostridium difficile, now costs $500 per course of treatment in some areas. This is a generic medication that has been on the market for 50 years. The firestorm over drug prices is just another chapter in the ongoing story of ‘surprise bills’ which are more accurately characterized as ‘surprise gaps in coverage.’ Emergency physicians continue to fight for fair coverage for medical care, whether it is provided in the emergency department or by a bottle of pills. Physicians and patients must join together to fight back against the ‘heads I win, tails you lose’ strategy employed by health insurers. For more information, visit

ERs After Obamacare: More Patients, Fewer On-Call Specialists
The average monthly emergency department visit increased 5.7% in Illinois after the implementation of the Affordable Care Act (ACA) while population numbers remained flat. While visits to emergency departments in Massachusetts climbed steadily from 2005 to 2014, the availability of on-call specialists declined significantly (surgeons, psychiatrists and other specialists). The results of two state studies were published online in Annals of Emergency Medicine.

A large post-ACA increase in Medicaid visits and a modest increase in privately insured visits outpaced a large reduction in emergency department visits by uninsured patients. “We still don’t know if these results represent longer-term changes in health services use or a temporary spike in emergency department use due to pent up demand,” said Scott Dresden, MD, MS, of Northwestern University Feinberg School of Medicine.

“During the studied period, the burden of increasing patient volume was clear. The proportion of emergency departments reporting any patients primarily cared for in the hallway climbed from 70% to 89%. That is obviously far from ideal and is indicative of an increasingly taxed emergency medical care system,” said Jason Sanders, MD, PhD, of the Department of Emergency Medicine at Massachusetts General Hospital in Boston. The study also reveals the following:

  • Annual emergency department visit volume in Illinois increased 8% from 2011 to 2015.
  • The average monthly emergency department visit volume increased 5.7% when comparing the pre-ACA period (2011 to 2013) to the post-ACA period (2014 to 2015). Hospitalizations were essentially unchanged, as was the size of Illinois’ population.
  • In Massachusetts, emergency department visits increased from an average of 32,025 to 42,000 from 2005 to 2015. There was also a significant drop in availability of specialists in surgery, neurology, obstetrics-gynecology, orthopedics, pediatrics, plastic surgery and psychiatry. Availability of general surgeons declined from 98% to 83% while 24/7 psychiatry availability declined from 56% to 33%. Availability of orthopedic surgeons, pediatricians and plastic surgeons also declined significantly.

For more information, visit


Ameritas to Acquire Guardian’s 401(k) Business
Ameritas Life Insurance Corp. completed its acquisition of the Guardian’s 401(k) plan business. The transaction increases the assets under administration of the retirement plans division to more than $10 billion. Bret Benham, of Ameritas said, “From the beginning of these discussions we viewed this as more of a strategic relationship than an acquisition. We’re planning a business-as-usual approach and I believe the financial professionals who do business with us, and our shared clients, will see little, if any, impact in the servicing of their plans. Companies bring exceptional talent, skill and value to the retirement plans arena, and ultimately, that benefits our plan sponsors and plan participants.” The retirement plans division of Ameritas now provides retirement plan investment and administration services to more than 6,000 businesses and public entities nationwide. Retirement plan clients range from the single life sole proprietor to the large corporate, non-profit and governmental employers.

Infinisource Spins Off HCM Technology Business
Infinisource has spun off its HCM technology business unit as iSolved HCM. Infinisource will continue as Infinisource Benefit Services and will focus primarily on administration of COBRA, FSA, HRA, ERISA, and additional associated services. iSolved HCM will move forward as a separate unit and concentrate on growing the market share for its human capital management technology through a mix of direct sales and the iSolved Network, a collection of certified providers who use the iSolved platform to service their customers. Jody Oliver, Infinisource Benefit Service CEO said, “Spinning off the technology business allows us to more fully focus on those critical services…We are committed to our broker partners and are adding products and services that supplement and enhance our core offerings.” For more information, visit 


Closing the Gap Between 401(k) Offerings and Workers’ Needs
A study by Transamerica identifies opportunities to increase retirement security through the workplace. For example, offering automatic enrollment is one of the most effective ways to increase plan participation. Seventy-one percent of workers like the idea of automatic enrollment, but only 21% of 401(k) plan sponsors offer it. Forty-one percent of large companies offer automatic enrollment as do 28% of small companies, and 18% of micro companies.

Automatic escalation increases a participant’s contributions to the plan, typically by 1%, annually or when they get a pay raise. Sixty-seven percent of workers like the idea of auto escalation, but only 28% of plan sponsors offer it.

The study calls for more education on the consequences of taking loans and hardship withdrawals from 401(k)s and IRAs. Limiting the number of allowable loans may also help. Twenty-three percent of workers have taken a loan and/or early withdrawal from their plan. The most common reasons are that the employee doesn’t have emergency savings, lacks insurance coverage, or needs to pay off debt.

Two out of three workers say they don’t know as much as they should about retirement investing. But many would be motivated to learn more if it was easier to understand. Personalizing retirement tools and education can get more people engaged. For example, workers in their 20s are almost twice as likely as workers in their 60s to find mobile apps to be helpful in managing their retirement accounts.

The survey illustrates a tremendous opportunity for employers to help employees balance work and care giving responsibilities. Just 58% of employers offer flexible work schedules to accommodate care giving. Only 47% allow their employees to take unpaid leave under the Family and Medical Leave Act (FMLA), which suggests that they are unfamiliar with the law. Given increases in longevity and the high cost of assisted living and long-term care, many workers will become unpaid family caregivers while balancing their careers, raising children, and saving for retirement. Lost work hours can can limit the caregivers’ retirement security.

Many workers envision a transition into retirement starting with part-time work. But only 25% of employers give pre-retirees the option of shifting to part-time work.

Eighty-nine percent of workers say that a retirement plan is an important workplace benefit. Ninety percent of workers who are offered a 401(k) or similar plan are saving for retirement compared to just 48% of workers who are not offered a plan. Plan sponsorship rates are relatively high with room to grow. Seventy-four percent of companies offer a 401(k) or similar employee-funded plan (SEP, SIMPLE). That includes 92% of large companies (500+ employees), 89% of small companies (100 to 499 employees, and 72% of micro companies (10 to 99 employees).

Only 38% of employers extend plan eligibility to part-time workers. “By addressing the coverage gap among part-time workers, policymakers can help improve the retirement outlook of women and lower-income workers who are more likely than other demographic segments to work part-time,” said Catherine Collinson, president of TCRS and Transamerica Institute. Collison said that the solutions are well within reach, yet some may require public policy reforms, assistance from employers, and industry innovations. Collinson’s testimony before the U.S. Senate Special Committee on Aging, which contains a full set of recommendations, and related TCRS research reports can be found at this link

Insurance Agents and the Fiduciary Rule
Michael Kalen, CEO of Futurity First Financial explained to California Broker Magazine how the DOL fiduciary Rule would affect insurance agents. Insurance agents would be required to meet a fiduciary standard for certain annuity sales when the source of funds to purchase the annuity comes from a 401k, IRA, or similar qualified retirement plan. Today, they are required to meet a suitability standard. The practical differences between the two would mean changes to the agents sales process, compensation, record keeping, and a variety of other related to new technology, enabled E&O insurance, and other costs. The industry is aggressively trying to build tools to help agents adjust to these new requirements. The new regulation adds complexity because it doesn’t apply to all annuity and life products And doesn’t apply when the source of funds for the purchase are from non-qualified accounts.


Individual Life Premium Up Slightly For First Half Of 2016
Individual life insurance new annualized premium increased 2% for the first half of 2016, compared to the first six months of 2015. In the second quarter, new annualized premium was flat, according to a LIMRA survey. A 7% decline in indexed universal life (IUL) stifled individual life insurance sales. As a result, sales in the second quarter were level with prior year. This is only the second time IUL premium has dropped in a quarter over the past 10 years, said Ashley Durham, associate research director, LIMRA Insurance Research. LIMRA attributes much of the decline to the recent illustration regulation, Actuarial Guideline 49, which went into effect in September 2015.

There was a 1% increase in individual life insurance policies sold in the second quarter increased, marking the seventh consecutive quarter of positive growth. Through the first half of 2016, there was a 2% increase in the total number of policies sold. Universal life (UL) new annualized premium fell 4% in the second quarter due to the decline in IUL sales, which account for 55% of total UL sales and 20% of all individual life premium year-to-date. Total UL premium represented 36% of all life insurance sales in the first half of 2016.

Whole life product sales continued to climb as new annualized premium increased 6% in the second quarter. Year-to-date whole life rose 8%. Similar to last quarter, whole life products made the largest contribution to total individual life premium growth in the second quarter. If this trend continues for the remainder of 2016, it would represent the eleventh consecutive growth year for whole life. Year-to-date, total whole life premium represents 37% of the total life market. Variable universal life (VUL) new annualized premium fell 12% in the second quarter, resulting in a 12% decline year-to-date. Election year volatility is expected to disrupt VUL sales throughout 2016. VUL market share was 6% of total life sales in the first half of 2016.

Term life insurance new premium grew 2% in the second quarter, compared to prior year. This represents the seventh consecutive quarter of growth for term life. Term life market share was 21% for the first half of the year. For more information, visit


Petersen Hires Regional VP
Valencia-based Petersen International Underwriters hired Lori Boggs as a regional vice president of the firm. Boggs was previously the national account management vice president of MetLife Insurance Co., and she is one of the country’s foremost disability insurance experts. Boggs will be home-based on the East Coast. For more information, call 800-345-8816, email, or visit


Juvenile Life Insurance Plan
Colonial life is offering a new juvenile whole life insurance plan. It is is offered as a voluntary benefit through the workplace. Employees can select this coverage for their children, grandchildren, step-children or adopted children as a separate policy, whether or not they buy coverage for themselves. They can choose coverage amounts from $10,000 to $300,000, with options to increase the amount when the child turns 18, 21 and 24 without any health questions. Ownership of the policy may transfer to the child at age 18. For more information, visit