IRS Fines Threaten HRAs
The Council for Affordable Health Coverage and 25 allied organizations urged Congress to take up the Small Business Healthcare Relief Act (H.R. 2911/S. 1697) in the remaining days of the congressional session. The bill would allow employers to offer health reimbursement arrangements (HRAs) without being subject to outrageous IRS fines. Joel White, president of the Council said, “We are in a race to the finish to save Americans’ health benefits.”
Many small business employers have reimbursed employees for individually purchased health coverage and related medical expenses through HRAs. But since July 1, the IRS has deemed these arrangements impermissible, fining employers that provide HRAs $100 per day, per employee. The ACA fine is one-eighteenth that sum for larger businesses that provide no coverage at all. White said, “With penalties that could amount to $36,500 per employee, or $500,000 total, employers will be forced to draw back their helping hands.” For more information, visit www.cahc.net.
ACA Reporting Could Be a Security Nightmare
Under the ACA, employers must now track and provide private healthcare information to the IRS, which could be a security nightmare, according to Greatland Corp. Starting this filing season, reporting is mandatory for any company with at least 50 full-time equivalent (FTE) employees. They must provide employees’ personal information from tax systems and health insurance information. This opens the door for simple errors, and could lead to misuse or abuse of personal information. Combining this information from two very different regulated databases and importing the data into the unfamiliar 1095 form can create security issues.
Employers use the 1095 form to report the offer of coverage to employees and to the IRS. The 1095 form requires data that is typically stored in the employer’s payroll system and HIPAA-protected benefit information. It is most often included in the employer’s HR software.
With the increase in filing regulations this tax season, Greatland has noted an increase in businesses claiming to offer these services. Often, these opportunistic companies fail to understand the detailed documentation; they don’t have the skills to navigate ongoing changes; and they don’t offer the software with security measures to keep the information safe.
Employers must send 1095 forms by the end of January. Because January 31 falls on a Sunday in 2016, statements must be mailed by February 1, 2016. Employers have until the end of February to provide this information to the IRS if filing paper forms or until the end of March if filing electronically. Employers with 250 or more forms must file them electronically. While incorrect filings will not be penalized for calendar year 2015 filing (reported in 2016), employers and insurers are still required to file on time and make a good faith effort to comply. For tips on filing requirements, visit http://www.greatland.com.
Medicaid Expansion Improves Breast Cancer Screening for Low-Income Women
Low-income women in Medicaid expansion states are more likely to have a breast screening, according to a study presented at the annual meeting of the Radiological Society of North America (RSNA). As part of ACA, states had the option of expanding Medicaid to provide coverage to people under 65 living at up to 133% of the federal poverty level (FPL). California, Connecticut, Minnesota, New Jersey, and Washington, as well as Washington, D.C., were among the first to adopt and implement the expansion by 2011.
“While increased use of screening mammography has significantly contributed to improved detection of breast cancer, substantial disparities in breast cancer screening exist among populations in the country,” said the study’s lead author, Soudabeh Fazeli Dehkordy, M.D., M.P.H., from St. John Providence Hospital in Southfield, Mich. For more information, visit http://www.rsna.org.
Emergency Doctors Complain About New Balanced Billing Reg
The federal government issued a new regulation that allows health insurance companies to pay doctors in emergency departments essentially whatever they like, opening the door to the possibility of reimbursements that do not even cover the costs of care, according to the American College of Emergency Physicians (ACEP). Dr. Jay Kaplan, president of ACEP said that the organization is considering legal action. According to the ruling, even the minimum standards of payment are not necessary in states that have banned balance billing. Balance billing occurs when health plans pay reimbursements, and physicians bill patients for the unpaid balances.
Kaplan said, “Health insurance companies have taken gross advantage of patients and emergency medical providers since the ACA, arbitrarily slashing payments to physicians by as much as 70%. This new ruling will significantly benefit health insurance companies at the expense of physicians because they know hospital emergency departments have a federal mandate to care for everyone, regardless of ability to pay. They will continue to shift costs onto patients and medical providers, and shrink the number of doctors available in plans. Instead of requiring health plans to pay fairly, this ruling guarantees that insurance companies can pay whatever they want for emergency care.” The new regulation was issued by the Department of the Treasury, the Department of Labor and the Department of Health and Human Services. For more information, visit http://www.acep.org.
More Insurers Are Meeting MLR Requirements
The number of insurers meeting medical loss ratio requirements is increasing, according to a report by AM Best. As insurers have had more time to adapt to the new ACA environment, more have been meeting the minimum loss ratio (MLR) requirements every year. In the large group market, 64% of insurers met the 85% requirement in in 2014 compared to 56% in 2011. Sixty-three percent of insurers met the 80% MLR requirement in 2014 compared to 51% in 2011. The individual market has performed the most poorly, as states averaged only 45% of insurers meeting the MLR requirement in 2011.
There has been increased collaboration among providers, health plans, and government, as well as renewed interest by providers in creating, acquiring health plan capabilities or better aligning with carriers. This collaboration is partly the result of the ACA forcing a change, such as implementing the MLR requirements. The competitive pressures from consolidation in the marketplace have also been a driving force of this transformation.
Insurers’ expenses related to health care quality improvement accounted for 7.7% of total expenses among insurers that filed the Supplemental Health Care Exhibit in 2014. For this calculation, expenses include total claims adjustment expenses, health care quality expenses, and total general and administrative expenses. The allocation to health care improvement expenses has declined for the total filing population in each of the past two years after peaking at 8.5% in 2012.
Nevertheless, health care spending in the United States exceeds that in other countries, despite a global slowdown in spending growth in recent years. For more information, visit http://www.ambest.com.
Prudential Provides Life Insurance to People with HIV
California Insurance Commissioner Dave Jones commended Prudential for being the first major insurer to offer individual life insurance to people with HIV. Jones said, “Given the advances made in medical treatment and the fact that people with HIV are living longer and fuller lives, acknowledging that HIV is a chronic but manageable condition is the right thing to do…Prudential and its partner Aequalis are to be commended for making life insurance coverage available to HIV patients.”
LIFE INSURANCE AND ANNUITIES
U.S. Life and Annuity Insurers Positioned To Address Shifting Tides in 2016
U.S. life and annuity insurers will enter 2016 in relatively good financial condition. Rapid advances in technology, rising customer expectations, and increasing competition will require insurers to reinvent their strategies, services, and processes, according a report by Ernst & Young. Global economic conditions, regulatory and monetary policies, and the political landscape are still concerns for the industry. Life and annuity insurers need to take decisive action to stay ahead of the curve. “After years of bolstering their balance sheets, life-annuity firms are in a strong position to invest in the innovations and technologies needed to fuel growth,” said Doug French, of Ernst & Young. According to the report, life-annuity insurers should focus on these six areas in 2016:
- Increase innovation: Insurers should create a culture of innovation, drive innovation through cross-functional teams, and share information openly across departments.
- Reinvent products and services for the new digital customer: If insurers don’t respond to customer demands for greater digital access, better information, and quicker service, they will have a hard time attracting and retaining customers. Priorities in 2016 should include offering multi-device access for customers, providing clearer product information and pricing transparency, delivering more flexible solutions, improving customer engagement, and moving from focusing on products to serving as a trusted advisor.
- Adjust distribution strategies for technological and regulatory shifts: Life and annuity insurers may lose market share if they fail to adapt to a multi-channel world. Insurers should adapt services for new distribution models and explore the use of robo-advisors. Insurers need to prepare for new fiduciary standards, as the Dept. of Labor’s proposed fiduciary rule could upend existing distribution models in 2016.
- Drive efficiency and market growth: Insurers should determine whether their systems are ready for rapid market change. The assembly-line approach to policy quoting, issuance, and administration can slow application turnaround and detract from the customer and distributor experience. Companies also should ensure that their systems meet new regulatory standards. They should invest in next-generation processes and analytics, revamp IT systems built for simpler times, and consider partnerships to facilitate technology transformation.
- Hire the right talent: Insurers need to attract young, diverse workers to match emerging customer demographics and help drive innovation. Priorities for 2016 should include competing for the talent, offering more flexibility in work locations, finding creative ways to motivate and reward employees, and making diversity a priority.
- Place cybersecurity high on the corporate agenda: Leveraging social media, the cloud, and other digital technologies will expose life and annuity insurers to greater cyber risks in 2016. Companies will need to take a broad view of potential risks, such as cyber-attacks and reputation risks through social media. Insurers also should establish processes to monitor changing data regulations around the world since their data could reside in multiple jurisdictions and be subject to a variety of laws.
For more information, visit http://www.ey.com.
Decline in Cognitive Ability Affects Annuity Purchases
Risk aversion and lower cognitive ability may deter some seniors from purchasing annuities, according to a study by the University of Missouri. Older people with lower cognitive abilities are susceptible to behavioral biases, such as being adverse to upfront costs. Michael Guillemette, an assistant professor from the University of Missouri says that the industry could improve the demand for annuities by breaking the large upfront cost into incremental payments. In other industries, companies break up upfront costs to increase sales. For example, a mobile phone company may allow you pay for your phone over several months.
Some financial products, such as annuities, have upfront costs. With a pure-life annuity, the purchaser pays an upfront cost that is typically $50,000 or higher in exchange for getting monthly payments for life. The risk associated with annuities comes from the uncertainty of death. If the full amount of the annuity is not paid out before the death of the recipient, the money is lost. “In our study, an upfront cost caused people with lower cognitive abilities to shy away from future risky decisions,” he said.
Financial advisors often describe annuity products as investments, but they might be more appropriately framed as insurance products that protect against loss.
“A certified financial planner who is a fiduciary could be beneficial because he or she could recognize those cognitive shortfalls and work in the individual’s best interest in terms of proper financial decisions…Baby Boomers have insufficient retirement assets. A strain on the Social Security System leaves questions for how this generation will support themselves as they age. Annuities can play an important role for older Americans. Serving as a type of insurance, annuities can help protect people from running out of money before death,” he added. For more information, visit http://munews.missouri.edu/news-releases/2015/1201-decline-in-cognitive-ability-leads-to-fear-of-upfront-costs.
Employee Benefits’ Preferences Vary by Generation and Gender
Which employee benefits do employees want? It depends on their generation and gender, according to a study by MassMutual. Forty-seven percent of American workers age 18 and older want more vacation time, and 44% want better 401(k) matches. Upon closer inspection, Baby Boomers (ages 50-70) and Millennials or Generation Y (ages 15-35) want more time off from work while Generation X (ages 36-49) want richer retirement benefits, according to the study. Men tend to prefer more time off while women tend to prefer health-related benefits.
“Given the varied preferences for employee benefits, the takeaway for employers is to offer as broad a menu of benefits as possible and consider offering new or expanded benefits on a voluntary or employee-paid basis. We’ve found that connecting to workers based on their age, gender, and life stage drives greater satisfaction with benefits. Offering guidance tools helps employees make the most of their benefits,” said Elaine Sarsynski of MassMutual. The study includes the following highlights:
• 50% of Boomers and 48% of Millennials would choose more vacation days if they could.
• 47% of Gen Xers prefer better 401(k) matches, with more vacation days coming in a close second (44%).
• After choosing more time off, Boomers expressed preferences for financial benefits. Forty-three percent of Boomers want better 401(k) matches, 38% want free healthcare coverage, and 24% want more investment choices for their retirement savings. Forty-three percent want expanded healthcare benefits.
• Millennials want flexible work schedules (43%) and reimbursements for education and tuition (30%). But many Xers want better 401(k) matches. Few Xers have access to pensions, and many Boomers have not saved enough for retirement, according to Sarsynski.
• Men want more vacation time (50%), better 401(k) matches (43%), and flexible work schedules (39%). Women want more vacation (44%), better 401(k) matches and flexible work schedules (40%), expanded healthcare premiums (37%), and free gym memberships (31%).
• In addition, there are bigger disparities between men and women when it comes to benefits, such as free gym memberships (men: 20%; women: 31%), education/tuition reimbursement (men: 18%, women: 27%), and more investment choices for retirement (men: 18%, women: 11%).
For more information, visit Facebook.com/RetireSmart.
Though a licensing agreement with Brighter, Cigna dental customers will have access to improved cost and quality transparency tools, including dentist profiles and verified patient reviews. Most customers will be able to see actual fees for services by dentists before making an appointment. Online appointment scheduling and electronic appointment reminders will be available at network DPPO dentists who have elected to provide these conveniences. The new tools and features will be available on myCigna.com.
Genworth has launched the Annuity Smart Application Process. The free electronic platform is designed to help financial professionals improve the accuracy of annuity applications, boost productivity, and improve the customer experience. The forms used in the electronic platform are identical to the paper application process, eliminating the learning curve for financial professionals. For more information, visit genworth.com.
Genworth launched an index crediting strategy on select SecureLiving fixed index annuity products. The strategy is based on the Barclays U.S. Low Volatility II Equity ER Risk Controlled Index. The volatility control spread strategy is designed to deliver greater growth opportunity than a traditional cap strategy, with more stable spreads regardless of the interest rate environment. For more information, visit genworth.com.
Individual Vision Plans
Nationwide is offering individual vision insurance plans on LiveVeryWell.com. The multi-carrier insurance exchange platform offers individual vision and dental insurance with the ability to rate and review products, allowing consumers to compare, quote, and match plans.
Aflac is expanding its offerings to deliver fraud and identity protection services for policyholders. The partnership with EZShield will provide cost-effective service to help protect an employee’s personal and financial information, provide ongoing Internet monitoring, and deliver full identity restoration. For more visit aflac.com/aflacbusinesssolutions.
Nationwide’s retirement plan business now offers access to LPL Financial’s Employee Advice Solution. The new tool allows Nationwide to give advisors the data they need to offer timely, personalized financial advice to plan participants. Based on information that participants provide about their financial picture, they can work with a financial advisor directly to get personalized retirement advice or manage their accounts on their own. They can also get advice all the way through retirement. For more information, visit http://lplfinancial.lpl.com.