New Law Increases Financial Protections for Seniors Investing in Annuities

IN CALIFORNIA
New Law Increases Financial Protections for Seniors Investing in Annuities
New consumer protections were ushered in when Governor Brown signed Senate Bill 426 (Leyva) into law. Under the new law, the death benefit for fixed deferred annuities must be at least equal to the annuity amount or the accumulation value for those annuities issued to consumers 65 or older. The law also prohibits companies from charging a surrender penalty on the death benefit payment. Commissioner Dave Jones said, “While many companies do not pay out a death benefit that is less than the premium paid, some insurers do apply surrender penalties reducing the death benefit below the total premiums, which is the reason for this important legislation. I thank Senator Leyva for partnering with me on this change in law.”  Taking effect on January 1, 2016, SB 426 earned strong bipartisan support in the Legislature and was supported by the California Advocates for Nursing Home Reform, California Health Advocates, Congress of California Seniors and the Elder Financial Protection Network. Commissioner Jones encourages seniors to learn more about their options by visiting the Senior Information Center on the California Department of insurance web site at insurance.ca.gov.

Annuity Agent Arrested
John Paul Slawinski, 59, was arrested at his home in Palm Desert on July 29, and is being arraigned on Friday, August 1. Slawinski is charged with five felony counts of financial elder abuse and five counts of burglary. Investigators say that Slawinski, a licensed insurance agent, convinced some victims to surrender annuities and investment products with the promise of higher returns through new investments. They say that he conned other victims into giving him money to invest for them. Slawinski did not purchase annuities or investment products, nor did he refund the victims’ money. Bail is set at $2 million. The Dept. of Insurance launched an investigation after getting complaints about Slawinski’s business practices in the sale and surrender of annuity products. Slawinski concealed his theft by giving the victims fraudulent financial statements and issuing minimum investment payments to lead them to believe their insurance investment and life savings were secure.

The Department of Insurance encourages anyone who may have done business with Slawinski and/or JPS Insurance Services to contact the Rancho Cucamonga Regional Office at 909-919-2200. The Riverside County District Attorney’s Office -Elder Abuse Unit is prosecuting the case. This case is being investigated and prosecuted under the Life and Annuity Consumer Protection Program (LACPP). LACPP provides grant funds to counties for the prosecution of financial abuse in life insurance and annuity product transactions. Slawinski’s insurance license was revoked on June 13, 2014.

Settlement in Executive Life Insurance Case Ends 16 Years of Litigation
California Insurance Commissioner Dave Jones announced a settlement with the last remaining defendant in a 16-year-old lawsuit brought by the California Department of Insurance that arose out of the 1991 liquidation of Executive Life Insurance Company. The French company Artemis S.A. agreed to pay $200 million in addition to $110 million it has already paid. The National Organization of Life and Health Guaranty Associations and the California Life and Health Insurance Guarantee Association also joined in the settlement.This settlement agreement closes the last chapter in the long dispute between the Department of Insurance and Artemis S.A., one of the purchasers of the Executive Life Insurance Company. Total recovery in the Executive Life Insurance litigation against all defendants is over $930 million.

California-based Executive Life Insurance Company became insolvent in 1991. The California insurance commissioner at the time, John Garamendi, solicited bidders to buy its assets, including its multi-billion dollar portfolio of junk bonds and the insurer’s life insurance policies and annuities. In a competitive bidding process, the commissioner selected a joint bid from a consortium of French companies that included Altus S.A., a subsidiary of Credit Lyonnais, which was owned by the French government. In winning the bid, Altus bought Executive Life’s junk bonds and its consortium partners set up and owned a new California insurance company that took over Executive Life’s policies.

California law prohibited a foreign government from owning a California insurance company, which meant Altus could not legally own the new California insurer. The conspirators concealed Altus’ ownership and lied to the California Department of Insurance and the Federal Reserve Bank of New York. Artemis joined the conspiracy later.

The California Department of Insurance discovered the conspiracy and sued all conspirators, which began a lengthy legal fight. The department’s lawsuit asserted that if the conspiracy had been disclosed, former Insurance Commissioner John Garamendi would not have selected the Altus consortium bid and instead would have selected a bid that, over time, would have returned more money to Executive Life’s policyholders. On the eve of trial in 2005, Commissioner Garamendi settled with Credit Lyonnais, Altus and related parties for $516.5 million and with the new insurance company for $78.75 million. Artemis paid $110 million to the Executive Life estate as a part of a settlement of a separate case brought by the U.S. Attorney. Other defendants paid over $25.5 million to the Executive Life Insurance Company estate. Under the commissioner’s supervision, the litigation recoveries were distributed to policyholders. Because Artemis did not join the earlier settlements, the department’s case against Artemis went to trial in 2005. At trial, the federal court barred the commissioner from presenting evidence about the damage the conspiracy caused to Executive Life’s policyholders. Instead, the court ordered Artemis to pay $131 million in its profits to the policyholders.

In 2008, the U.S. Court of Appeals sent the case back for another trial in which the commissioner was to be allowed to present his case for damages. The retrial occurred in the fall of 2012. During the trial, the commissioner contended that a new trial judge incorrectly instructed the jury. Both sides appealed the judgment in the retrial. That appeal was pending when this settlement was reached.

Documentary Questions Benefits for California Judges
Emmy Award Winners Ed Asner and Leslie Dutton of the Full Disclosure Network have produced the documentary feature, “Corrupted Justice.” The documentary details the illegal double benefits to California judges, who took hundreds of millions of taxpayer dollars while public employee benefits remained unfunded, state employees were furloughed, and workers compensation benefits were slashed. Watch the three-minute movie trailer here: corruptedjustice.com.

Former California Governor Arnold Schwarzenegger unwittingly becomes a focal point in the documentary for his role in facilitating secret legislation in a Special Budget Session, in which he approved retroactive criminal immunity from prosecution for all California judges and elected officials who were involved in taking and giving illegal payments. Full Disclosure Network says that its film illustrates the judges’ disdain of court rulings, public opinion and judicial ethics, related to the illegal payments, amidst the backdrop of public outrage over public pension defaults nationwide.

According to the Full Disclosure Network, “Featured in the documentary are elected officials who along with Governor Schwarzenegger have kept the public from learning about the double benefits that unfairly benefited California judges. That includes former Senator Darrell Steinberg, former Attorney General Jerry Brown, and  Attorney General Kamala Harris. The Corrupted Justice Documentary reveals to taxpayers and the international community the innermost workings of the American Judiciary and governmental process. Court insiders and prominent attorneys provide unprecedented insight on procedures normally shrouded in secrecy. In a most glaring example of unconstitutional behavior, the film reveals the retaliation used against those who dare to challenge the judiciary.”

MEDICARE
House Passes Medicare Advantage Bill

On June 17th, the House of Representatives passed The Strengthening Medicare Advantage through Innovation and Transparency for Seniors Act of 2015 (H.R. 2570. The bill would establish a demonstration project allowing Medicare Advantage plans to use Value-Based Insurance Design (V-BID). The concept comes from Univ. of Michigan research. Researchers found that reducing out-of-pocket costs for some high-value medical services for certain patients can improve health outcomes and reduce disparities. It may also slow the growth of health care costs. If the bill becomes law, it would allow Medicare Advantage plans to lower co-payments and coinsurance for beneficiaries, encouraging the use of high-value, evidence-based medical services to manage chronic conditions. It prevents plans from increasing beneficiary cost sharing on any service.

The legislation was originally introduced by U.S. Reps. Diane Black (R-TN), Earl Blumenauer (D-OR) and Cathy McMorris Rodgers (R-WA). The bipartisan companion bill, the Value-Based Insurance Design Seniors Copayment Reduction Act of 2015 (S.1396), was introduced to the Senate on May 20th by U.S. Senators Debbie Stabenow (D-MI) and John Thune (R-SD). In addition to the Capitol Hill activity, V-BID was included in a recent Centers for Medicare and Medicaid Services (CMS) Request for Information to Innovate Medicare. Numerous private and public payers have implemented V-BID programs. For more information, visit ihpi.umich.edu.

Fewer Counties Have Zero-Premium Medicare Advantage Plans in 2015
Most Medicare beneficiaries in 2015 have access to Medicare Advantage plans with $0 premiums, but the number of plans has been declining since 2011. Looking at government data, HealthPocket found that Medicare Advantage plans with a $0 premium dropped from 813 in 2014 to 726 in 2015, with 113 fewer counties having access to these plans.

Fifteen states lost $0 premiums Medicare Advantage plans: California, Hawaii, Idaho, Iowa, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Utah, Vermont, Washington, and Wyoming. Nebraska had the most counties in 2015 that lost zero-premium Medicare Advantage plans (36), followed by Montana (25), Idaho (23), California (12), and Vermont (8). The only states that did not have any $0 Medicare Advantage plans in 2014 and 2015 were Delaware and Alaska. HealthPocket also found that 16 counties had no zero-premium Medicare Advantage plans in 2014, but gained access to these plans in 2015. These counties were in the California, Maryland, New Hampshire, New Jersey, Oregon, and Washington. Since 16 counties gained access to zero-premium Medicare Advantage plans and 129 counties lost access to zero-premium Medicare Advantage plans, there were 113 fewer counties with access to zero-premium Medicare Advantage plans in 2015. Star ratings were higher (3.83 stars) for Medicare Advantage plans that had $0 premiums in 2015, but not 2014. Similarly the average rating for Medicare Advantage plans that had $0 premiums in 2015 and 2014 was 3.84 stars. For more information, visit HealthPocket.com.

CMS Changes Chronic Care Management

The Centers for Medicare and Medicaid Services (CMS) is trying out remote doctor visits for patients with two or more chronic conditions, according to an analysis by Frost & Sullivan. Medical practitioners can now bill non-face-to-face communications with Medicare beneficiaries. This promising revenue-generating system involves a minimum of 20 minutes of non-face-to-face service. This service can only be billed by one practice per month. The practice will assume full care-coordination responsibility including the use of certified electronic health records needed when communication is necessary among medical experts. If this model lives up to its potential, private payers and benefit plan managers may establish similar coverage. For more information, visit connectedhealth.frost.com.

Bill Would Expand Access to Home Healthcare Services

The Partnership for Quality Home Healthcare is urging Congress to advance the Home Health Care Planning Improvement Act (S.578). Under the bill, nurse practitioners could certify home health services for Medicare beneficiaries without getting physician approval. Nurse practitioners are already certified to perform such evaluations for hospice services. Eric Berger, CEO of the Partnership said, “Allowing nurse practitioners to certify patients for Medicare’s home health services would remove barriers to care that restrict access to patient-preferred healthcare for homebound beneficiaries. The Partnership commends Senator Susan Collins and her colleagues in the U.S. Senate for sponsoring this legislation, which would improve access to skilled home healthcare for Medicare’s most vulnerable patient population, particularly those patients living in underserved and rural parts of the country. For more information, visit homehealth4america.org.

Medicare Supplement Insurance Association Announces Conference
The Medicare Supplement Insurance Industry Summit will be held April 25 to 27 in Kansas City, MO. As the only forum exclusively focused on the growing Medigap market, this conference brings together hundreds of industry leaders and experts. For more information call 818-597-3205 or visit www.medicaresupp.org.

HEALTHCARE
Organization Wants to End Big Pharma Influence on Medical Education
The national hospitality workers’ union (UNITE HERE) has launched a national program calling for an end to pharmaceutical influence on continuing medical education (CME) courses. This effort comes at the first anniversary of the Open Payments database, a federal program that collects and makes public information about financial relationships between the health care industry, physicians, and teaching hospitals. UNITE HERE will be gathering petition signatures in over 30 cities across the United States this summer and encouraging the Accrediting Council for Continuing Medical Education (ACCME) to end financial ties between Big Pharma and doctors participating in CME courses. Patients, doctors, and members of the public can sign the petition at NoMoreDrugMoney.org.

All doctors are required to participate in CME activities to maintain a license in order to practice. Most doctors resist money and gifts from drug companies, but some have taken thousands and tens of thousands of dollars’ worth of gifts from pharmaceutical companies. The launch of Open Payments last summer revealed that doctors in the U.S. had taken $4 billion dollars in gifts, cash, or other compensation from pharmaceutical or medical device companies. The ACCME reported that in 2011, the pharmaceutical industry spent $736 million on CME courses, and in 2013, CME activities were a major beneficiary of these types of compensations. ACCME has acknowledged in its own report that, “CME activities funded by commercial interests can be effective in changing physicians’ prescribing practices.”  Levi Pine, medical industry researcher for UNITE HERE said, “The fact that Big Pharma and their drug money have so much influence on our doctors is unethical and problematic.”

The Most Common Features in a Short-Term Policy
Ninety-two percent of companies that offer short-term health care insurance policies offer a 360-day benefit period. (Short-term health care products offer coverage for one year or less). Eighty-three percent offer a 150-day to 200-day benefit period, and 50% offer a 90-day benefit period, according to a study by the National Advisory Center for Short Term Care Information. “Changes in health care insurance benefits, Medicare coverage, and long-term care insurance are creating heightened interest in short-term care or recovery care products,” explains Jesse Slome, director the advisory center. “There is potential for significant growth. Several new insurers are entering the marketplace and policy sales and premium should grow in the years to come,” says Bryan Neary of CSG Actuarial, which conducted the study. “One of the features that makes these products extremely attractive is the ability to select a 0-day elimination period,” Slome explains. Sixty-seven percent of policies offer a 0-day elimination period; 75% offer a 20-day elimination period; and 33% offer a 30-day elimination period. Fifty-eight percent offer an inflation growth rider that increases base benefits by 5% compounded annually. Fifty-percent offer a simple inflation option. For more information, visit aaltci.org/stc.

Employers Split on How Carrier Consolidation Will Affect Them
In the wake of the proposed Aetna and Humana merger, 21% of employers say that carrier consolidation will provide greater cost efficiencies that will be reflected in better cost management. On July 8, Aon surveyed about 100 companies to get their reaction to carrier consolidation. Forty-six percent say it will result in fewer health plan options for them and their employees. One-third say it will not greatly affect their organization or employees.

Forty-four percent of companies don’t expect to make any meaningful changes to their health strategies while 54% are considering a few options. These include the following:

  • 38% Reassess their vendor in the next two years.
  • 13% Adopt third-party vendor solutions, such as tele-medicine or transparency to supplement what the health plan provides.
  • 5% Supplementing national carriers with regional/local players.

Seventy-six percent say that consolidation will not affect short-term decision-making. Fourteen percent say that the potential market disruption will encourage them to take a wait and see approach with custom group or exchange-based strategies. Just 10% say it will give them an opportunity to make changes and leverage the potential for new market efficiencies. Tucker Sharp of Aon Health said that most employers don’t feel the need to wait to see how the market shakes out before moving forward with their longer-term health care strategies. Employers know they need to take action now to address inevitable premium increases and the upcoming 2018 Affordable Care Act excise tax, he added.

LIFE INSURANCE
AIG Expands Presence in Chinese-American Life Insurance Market
AIG has launched a sweeping initiative to reach Chinese-American consumers in the United States. The carrier has begun recruiting several hundred additional life insurance agents to address the needs of Chinese-Americans. AIG is also enhancing its in-language case management and underwriting capabilities, and creating a concierge-level customer support center with employees who are fluent in Mandarin, Cantonese or both. John Deremo of AIG said that his company is recruiting agents from within the target market and exploring business opportunities with premier Chinese-American financial services professionals.

AIG’s research indicates that Chinese consumers value permanent life insurance. The carrier believes its Quality of Life Insurance product suite resonates strongly in the Chinese-American market. It offers flexible solutions to address multiple consumer needs.

Deremo said, “The Chinese-American market has proven to be an exciting area of growth for AIG Financial Network and AIG Partners Group…In this market, agents and consumers alike have a long and favorable association with AIG based on our roots in China, which began with the opening of a two-room agency in Shanghai in 1919.” The Chinese-American market already accounts for a significant percentage of AIG’s U.S. life business. Deremo said, “Later this summer, we will announce the opening of our prototype AIG Financial Network office that is specifically designed in consideration of the Chinese-American consumer. This office, which will be in Pasadena, Calif., will feature a tea room with round tables for conversation, Asian photography, and Chinese signage.” For more information, visit aig.com/chinesejobs.

NEW PRODUCTS
Quote Engine
Limelight Health has received major funding for its QuotePad, the first live, all-in-one quote engine for health insurance agents. Limelight Health received $3 million in Series A funding from MassMutual Ventures and AXA Strategic Ventures. Also investing in the round is the series seed lead investor LaunchPad Digital Health. QuotePad provides a mobile, data-driven quoting and modeling platform that enables health insurance professionals to quote and compare employee health insurance benefit information. For more information, visit limelighthealth.com.

Deferred Income Annuity
MetLife’s Guaranteed Income Builder deferred income annuity is now available as a qualifying longevity annuity contract (QLAC) for individual clients. Guaranteed Income Builder provides a pension-like stream of income for life, helping to address a top concern of today’s retirees: running out of money in retirement. By using Guaranteed Income Builder as a QLAC, clients can defer a portion of their required minimum distributions from their qualified IRA to a later date. For more information, visit metlife.com/income.

Online Health Data Security Education
SecurityMetrics has developed an educational learning center for compliance with the Payment Card Industry Data Security Standard (PCI DSS), Health Insurance Portability and Accountability Act (HIPAA), and other information security topics. The SecurityMetrics Learning Center features hundreds of  content pieces, including videos, webinars, infographics, articles, blog posts, ebooks, and white papers. For more information, securitymetrics.com.

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