The End of Life Option Act, Assembly Bill X2-15 (Eggman) is now in effect. Under the new law, if a terminally ill Californian, who meets the criteria in the law, takes medication to end their own life, it is not considered a suicide, so life insurance policy exclusions for suicide do not apply. Under the Death with Dignity law, patients of sound mind who who have a terminal illness and meet certain qualifications can request aid-in-dying medication. Commissioner Jones said, “Terminally ill patients in California now have a choice when facing end-of-life decisions and do not have to worry that the choice will cause them to lose their life or health insurance or annuity policy…This law will make it possible for those who meet the protections in the new law to have the option to get a prescription for an aid-in-dying drug from their physician.” Consumers and their families with questions about the new law or its application are encouraged to contact the department online or 800-927-4357.
California Employer Health Benefits: Workers Pay the Price
The percentage of employers offering coverage continued to decline in California, according to a report by the California HealthCare Foundation. Only 57% of employers say they provided health insurance to employees in 2015, down from 69% in 2000. Twenty-seven percent reduced benefits or increased cost sharing, and 41% said they were very or somewhat likely to increase employees’ premium contribution in the next year. This trend will have major implications for household budgets. The report also finds the following:
- 42% of firms that had many workers earning $23,000 or less offered health coverage in 2015 compared to 18% in 2014.
- Health insurance premiums for family coverage grew 4.5%, which is a slower growth rate than in recent years. Family coverage premiums have seen a cumulative 216% increase since 2002, compared to a 37% increase in prices.
- The average monthly health insurance premium was $573 for single coverage and $1,554 for family coverage in California, including the employer contribution. It was significantly higher than the national average.
- 40% of workers in small firms faced an annual deductible of at least $1,000 for single coverage, compared to 10% of workers in larger firms.
To get the complete report, visit chcf.org/publications/2016/06/employer-health-benefits.
Forum on Medi-Cal
The California HealthCare Foundation is holding a forum on the future of delivery system reform in Medi-Cal. It will be held Wednesday, July 13 from 12:00 to 2:00 PM at the California Chamber of Commerce Conference Room, 1215 K St. at Esquire Plaza, 14th Floor in Sacramento. To register email firstname.lastname@example.org
Consumers Resist Robo Advisors
Financial services firms may be banking on automated robo advisors, but consumers are not buying into the idea. In a new GfK Global survey, only 9% of consumers said they would be likely to use an investment advisory service that offered just digital (text or online chat) contact with human advisors. The 25 to 34 age group is most open to the idea (15%) while less than 5% of those 50 and above would embrace an all-digital service approach from their investment firms.
Tom Neri, managing director of GfK’s Financial Services team in North America said, “Financial service companies need to be cautious in deploying robo-advisor technology, making sure to provide their high-value customers with the service they need. A one-size-fits-all seems certain to alienate even young investors. Financial firms are betting on an increasingly automated customer service approach to help them stay lean in an unforgiving consumer marketplace. But even digitally native Millennials are only lukewarm to this vision when it comes to the difficult area of investments.”
Consumers are least open to completely automated customer service for investments and mortgages. They are slightly more willing to accept an all-digital service plan for checking and savings accounts. Not surprisingly, just 10% of those surveyed would trust a computer algorithm over a human to give financial advice. Trust in robo-advisors is highest among the 25-to-34 group (17%) and lowest among those age 65 and over (6%).
Thirty percent would pay more for access to a person for help with financial services, and 45% would not be willing to forgo live customer service in return for paying less. Consumers’ hesitation to embrace automated investment services may stem from disappointing experiences. Only 27% agree that it is easy to get the information they need from the websites of financial service firms. For more information, visit gfk.com/us
Digital Advice Could Fill a Need for Small Portfolios
Digital advice could offer a solution for consumers with portfolios that are too small to attract the attention of financial advisors, according a report by Cerulli Associates. Tom O’Shea, associate director at Cerulli said, “The mass market and the lower end of the middle market are under-served by financial advisors. A vast majority of consumers do not possess the assets necessary to merit attention from financial advisors.” O’Shea adds that combining human and digital advice can strengthen the fiduciary foundation of the client recommendations. This combination also allows an advisor to scale their practice to profitably manage the smaller accounts of mass-market consumers. Almost 90 million U.S. households have investable assets of less than $100,000. Yet, only 8% of financial advisors treat this segment as their core market. The overwhelming majority of advisors target clients with higher levels of investable assets. He adds, “It is not that advisors are unwilling to help small investors. Rather, they cannot figure out how to make money when working with them, leaving investors to go it alone or rely on guidance provided by direct-to-consumer firms.”
Revenues Climb Among Publicly Traded Health Insurers
Stock prices of publicly traded U.S. health insurance companies increased 3.3% in first-quarter 2016. This jump continues on the momentum from the previous quarter and beats the broader market’s 0.8% gain, according to an A.M. Best report. A.M. Best’s outlook for the health insurance industry was recently revised to negative from stable, largely related to earnings and capitalization pressure as a result of the Affordable Care Act (ACA). Of the 11 companies followed in the report, WellCare Health Plans reported the largest increase in stock prices at 18.6%, followed by Magellan Health Services at 10.2%. The average operating return-on-equity was a strong 22%. All but four companies reported returns-on-equity above 20%. Despite the positive return-on-equity, five companies were trading below the index price.
The health industry reported strong year-over-year revenue growth of 13.6% for the first quarter of 2016. More than 60% of the revenue growth was reported by UnitedHealth, which saw revenues increase $8.7 billion, or 24.5%. Strong revenue growth was also boosted by Molina Healthcare, Centene, and Triple-S Management, all of which reported increases of more than 30%.
With increased revenue and a decline in operating income, the aggregated operating margin for the population declined from 7.3% in the first quarter of 2015 to 6.2% for the same time period in 2016. On the other hand, the average operating margin for the group of companies is much lower, and has declined to 4.2% in the first quarter of 2016 from 4.7% for the same period in 2015. Premium has also grown faster in the past two years, driven by the new ACA exchange marketplace members and lower margin Medicaid managed care enrollment due to the expansion. However, the report notes that millions of non-subsidy-receiving consumers are likely to face some large premium hikes in 2017 as insurers take corrective pricing actions and some companies leave certain state exchanges due to unfavorable performance and mounting losses. For more information, visit www.ambest.com.
Value-Based Payment Hits the Tipping Point
The rapid pace of change in healthcare payment continues unabated, with payers reporting that they are 58% along the continuum towards full value-based reimbursement. That’s a 10% leap since 2014. Hospitals are 50% along the value continuum, up 4% in the past two years, according to a study by McKesson. In five years, payers expect nearly 60% of payments to be a mix of capitation/global payment, pay-for-performance, and episode of care/bundled payments, with bundled payments growing fastest. Health plans expect bundled payment to grow 6% over five years, edging ahead of capitation/global payment and shared risk growth. Hospitals and payers project bundled payment to top 17% of medical payments in five years. But just half of payers and only 40% of providers say they’re ready to implement bundles; only a quarter have the tools in place to automate these complex models. Rod O’Reilly, president of McKesson Health Solutions said, “Payers and providers are clearly beginning to scale value-based reimbursement. The swift pace of change, coupled with the daunting complexity of these payment models, is putting extreme pressure on the healthcare system. As we move beyond pilots, the ability for payers and providers to automate the complexity inherent in these models will be a deciding factor to success.”
Network management is also changing dramatically. Over 60% of payers have changed network strategy since 2014, with 53% using tiered and 42% using narrow networks now. And over 80% say they’re more selective about who are in their networks, with care quality the top criteria at 75% of payers. But hospitals say these network strategies are driving up patient confusion, denials, directory inaccuracies, referral management problems, and network leakage.
The fast rise of value-based reimbursement is intensifying complexity since the majority of providers are not meeting their goals. Only 22% of hospitals are meeting their goals to reduce the administrative cost of care; 26% are meeting goals to lower healthcare costs; 30% are meeting care coordination goals, and 40% are meeting goals for improving patient outcomes. For more information, visit mckesson.com.
Critical Illness Leads Voluntary Sales Growth
Total voluntary sales in 2015 grew 3.6 over 2014 for all product lines, according to an Eastbridge report. The critical illness product line had the highest increase with a growth rate of over 25% in 2015. Life insurance accounted for the largest percentage of sales—27% of all voluntary sales. Term life sales increased almost 9%. Total disability sales were up about 3%. Short-term disability sales increased 2% and long-term disability sales increased 3%.
Universal life and whole life sales decreased by almost 10% compared to 2014. Accident sales also showed impressive growth in 2015 with an increase of 11% over 2014 sales. Cancer sales were flat compared to 2014. Hospital indemnity/supplemental medical sales, which showed a solid increase in 2014, were down for 2015, primarily because of the winding down of sales and the elimination of limited benefit medical plans by several carriers. Sales for 2015 in that category declined 12%. For more information, visit eastbridge.com.
Obesity Is Driving Disability Claims
Disability claims have increased significantly over the past 10 years for joint disorders and musculoskeletal issues in the U.S., according to data from Unum. Greg Breter, senior vice president of benefits at Unum noted that aging Baby Boomers are staying in the workforce longer, and more than a third of U.S. adults are classified as overweight or obese. “Almost everyone over 55 begins to feel the twinges in joints and backs. But research is showing that obesity is contributing to a dramatic increase in knee replacement surgery and exacerbates other conditions like arthritis, back injuries and joint pain. We also see obesity contributing to other issues, like heart disease, stroke, type 2 diabetes, sleep apnea and respiratory problems, and certain types of cancer.” Aging and obesity tip scales in Unum’s 10-year review of disability claims. For musculoskeletal issues, there has been a 33% increase in long term disability claims and a 14% increase in short term disability claims. There has been a 22% increase in long term disability claims and 26% increase in short term disability claims for joint disorders. While Unum has seen an increase in joint and musculoskeletal issues, cancer has stayed the number one reason for long term disability claims over the past decade, and pregnancy continues to top the list of reasons for short-term disability.
Here are the top long-term disability causes for 2015:
- Cancer 16.5%
- Back disorders 13.9%
- Injury 10.4%
- Cardiovascular 9.6%
- Joint disorders 9.2%
Here are the top short-term disability causes:
- Pregnancy 27.4%
- Injury (excluding the back) 11.3%
- Joint disorders 2%
- Back disorders 7%
- Digestive system 6.6%
For more information, visit unum.com.
Voluntary Benefit Loan Program
MassMutual is offering Kashable credit services through the BeneClick! employee benefits exchange. Workers can get emergency funds without tapping their retirement savings. Kashable offers its loan program as an employer-sponsored voluntary benefit. Consumers can get loans online without filling out forms or visiting a bank. Employees are pre-qualified for credit based on their employment. The program provides rates starting at 6% APR with a six- to 12-month term. For more information, visit kashable.com.com or massmutualatwork.com/beneclick.html.
Flex Launches Online & Mobile Platform for Consumer-Driven Accounts
Flex launched a platform that provides a superior online and mobile experience for FSAs, HRAs, HSAs, and commuter plans. It features simpler ways to pay healthcare providers and personalized educational tools.
Fixed Index Universal Life
Allianz Life launched the Allianz Life Pro+ fixed index universal life insurance policy (FIUL). The death benefit is provided income-tax-free to beneficiaries. Life Pro+ also offers an optional inflation protection rider, which is unique to the FIUL industry. There is no cost if the rider is not exercised. Life Pro+ also provides the policyholder access to the cash value income-tax-free via policy loans. The 5.3% fixed participating loan rate is guaranteed, and is among the lowest participating loan rates available within the industry. There is an income-tax-free death benefit to beneficiaries, cash value that grows tax-deferred, and policy loans from the cash value that are income-tax-free while the policy is in force. For more information, visit www.axaforlife.com.
Guardian is offering two enhancements to its whole life insurance offerings. The Lifetime Protection Builder rider allows policyholders to transition term insurance to permanent insurance at regular intervals while maintaining the appropriate level of protection at a price they can afford. This rider provides cost-effective temporary insurance coverage over a 15-year period. Whole life policyholders can access their accumulated cash value by taking a policy loan on the policies’ 10th anniversary, for any reason. Clients can choose between fixed or variable loan interest rates upon the policies’ 10th anniversary. This is a feature unique to Guardian. The few carriers that offer a choice force consumers to lock in terms at the time they purchase their policies. For more information, visit GuardianLife.com.
Streamlined IUL Portfolio
AIG is offering a streamlined portfolio of index universal life (IUL) insurance products along with new educational resources for financial professionals and their clients. The two new IUL policies, Max Accumulator+ and Value+ Protector offer flexible death benefit protection, the potential to grow cash value with guaranteed floors to protect against loss in down markets, and multiple customization options to meet evolving individual and small-business needs. The Max Accumulator+ solution incorporates a combination of cash value enhancement features and riders not available in any other single policy. It’s for clients who are seeking accumulation and income potential. The Value+ Protector product, which is designed as an economical alternative to a guaranteed universal life (GUL) insurance policy, is focused on guaranteed protection while also offering the potential to grow cash value. For more information, visit retirestronger.com.
Online Claims Service
Colonial Life launched its online claims service. Customers can simply and quickly file claims online for disability, accident, cancer, critical illness, hospital confinement, and vision. A conversational, easy-to-use claims wizard guides them through a set of personalized questions. Customers can easily upload supporting claim documentation. The program won’t send the claim until all required questions have been answered. Once the claim is filed, customers get electronic confirmation the claim has been forwarded to Colonial Life. For more information, visit coloniallife.com.