What’s Ahead in California’s Health Insurance Market

open_enrollmentDon’t wait to start working with your groups to enroll in a health plan. This was a central message of the recent Warner Fest event in Woodland Hills, Calif.  John Nelson, CEO of Warner Pacific said, “Do as much as you can early on even though they [your clients] are waiting until December. Take their information. Put it on our system. You may not have complete data, but at least you have done 90% of the work.” An estimated 80% of group plans renew coverage beginning December 1 or January 1. Brent Hitchings Warner Pacific director of Sales for Northern California said, “Get your cases in as soon as you can. Last year, the business that came in prior to the effective date was done far sooner with less pain than business that came in after the effective date. It is not too early to get business in. In fact, we expect to start getting business for December 1 in September. Larger groups are not going to tolerate waiting until January for approval on a case. Prepare them that this is a unique time for the industry and this is what they are facing.”

This sentiment is echoed by Chris Patton vice president of Sales for Covered California for Small Business. In his upcoming article in the September issue of California Broker magazine, he says, “Blue Shield is touting lower rates for small groups renewing prior to the fourth quarter, which could save them up to 10%. Insurance providers, such as Health Net, are offering incentives to agents who conduct client renewals from July through October. Moving up open enrollment might allow companies with 50 or more full-time equivalent employees a chance to secure third quarter 2016 rates prior to 2017 increases.”

The New Small Groups
Neil Crosby, director of sales for Warner Pacific said that the new definition of small groups as one to 100 last January has been terrifying for employers. “There are so many employers in the mid market/large group segment that are now considered small group. They are not sure what to do, which creates a huge opportunity for you. There are 33,000 mid market/large group employers that have to move to small group. That represents 33 million employees. Fourteen percent of California’s entire workforce has to move from their large group/mid market plan into a small group plan. The average group is 70 employees and the average premium is $600 monthly. If you multiply that by 2.3 million employees, about $1.4 billion of monthly premium has to move to small group. That is $69 million in agent compensation that has to move from large group to small group. When those mid market/large groups were classified as large groups, you may not have been able to use a general agent or sometimes you had to share your commission. You don’t have to do that anymore. You get full compensation.”

Crosby added that these groups will no longer enjoy flexible plan designs or be able to negotiate their rates to soften rate increases. Also, some carriers are no longer offering a dedicated account manager for these groups. But the biggest issue is with composite rates. Nelson said that these larger groups have completely different expectations. “They have a sense of entitlement, which is deserved. They are larger cases and pay a lot of premium. They are used to calling us on the same number for claims and billing issues and getting an answer right away. To take this block of business and move them over to small group, which is very much cookie cutter, will be a culture shock in addition to the rating methodology changes.”

Speakers also outlined the benefits of selling to the senior market and unveiled Warner Pacific’s new services to brokers who sell Medicare. Nelson outlined how Medicare products could offer a lifeline to brokers who sell in the problematic individual market. In some states, carriers are withdrawing from individual markets or not paying commissions for new business. Outside of California, there have been huge rate increases. “That will get fixed and our customers will be fine, but it is going to take some time and some regulation. In the meantime, if you are used to selling individual, I would look into the senior products because that is very important for insurance companies.”

Hitchings said, “When you have a market like seniors that insurance companies deem very important, and very much of a profitable business line, it is really great for agents. They are in competition for your time and services. Hitchings gave the following reasons to get into Medicare product sales:

  • Demographics: “California is the number one state with people who are 65 or older. About 1,000 people age into Medicare each day. The is a huge opportunity for all of us.”
  • The retention rate: “You will, on average, retain 85% of your clients in the senior marketplace. The average policy life is six years.”
  • The commissions: “Carriers need us to get market share. They are competing for your business.” “Medical supplement commissions are upwards of 20% the first year with a 10% renewal. Medicare Advantage compensation for a new entrant is $400 for the first year and $200 per renewal on a per-member basis.”
  • Your book of business: “You need to be a resource for your group customer. You want to retain clients who are aging out of individual, small group, and large group plans. Protect your book of business.” “The 51 to 100 market is moving to member-level rating. Who is the most impacted? Those about to turn 65. When they get this big of a rate increase, they are likely to turn to their employers for solutions. Employers will ask you to help with solutions for their employees.”

As part of its senior product launch, Warner pacific will be introducing a portfolio of carriers in California and nationwide with a full complement of senior products along with support and training.

As for a repeal or replacement of the ACA, Crosby said, “The ACA is here to stay. There is just too many positive provisions in the law that have helped your clients to the point that there is no way that it will be repealed and replaced.” Nelson added that agencies keep adding provisions and requirements to the ACA.

The Small Group Market
Nelson said that competition in the small group market is alive and well. “The Small group market is solid. It is not going the same way as the individual market. It is a great market to be involved in. Competition is alive and well,” he said.

Does Aetna Exit Signal Deeper ACA Problems?
San Diego Union-Tribune
The insurance giant Aetna will will stop offering Obamacare health plans in 11 of 15 states, citing $200 million in losses this year and more than $400 million since 2014. The announcement, made Monday night, was the latest blow to the Affordable Care Act, which had already suffered the departure of top-five insurers Humana and UnitedHealthcare and has seen double-digit premium increases for many of the carriers that will continue to sell through health exchanges such as Covered California next year. In general, carriers have said too many sick patients are the main reason they’re dropping out of exchanges or raising rates. With not enough young and healthy enrollees to balance out the claims ledgers, the three companies that are pulling out or down scaling said they have lost hundreds of millions of dollars.

So do these developments mark the beginning of the doomsday scenario for Obamacare? Before the law’s main insurance provision took effect in 2014, many experts predicted that guaranteeing coverage to all consumers regardless of their pre-existing medical conditions would eventually create “sick” insurance risk pools that could not cover their costs without large premium increases each year.

The experts disagree on whether the latest pullbacks and significant pricing hikes, floating in a sea of election-year politics, signal that the nation’s health insurance exchanges have reached a terrible tipping point or are simply seeking a new state of equilibrium.

Gary Claxton, director of the nonprofit research group Health Care Marketplace Project at Kaiser Family Foundation, takes a middle position. He said the currently available facts can be interpreted either way, and that means Obamacare’s upcoming open-enrollment period — its fourth annual — is critical. It will all come down to whether the number of enrollees in Obamacare plans continues to grow, he said. “We won’t know until the next open enrollment, are we still moving forward or are we stalled or moving backward?” Claxton said. ” If the market grows, then I think many insurers will find a way to be part of it… The next couple of months are a moment of truth.”

Just how bad the problem is depends on who you ask. UnitedHealthcare said in April that it expects to lose $650 million this year because the cost of its Obamacare policies has exceeded revenue generated from premiums. Then late Monday brought Aetna’s announcement of its deficits. While its book of business includes insurance plans sold outside of Obamacare exchanges as well, all plans on the individual market (not employer-based policies) have been affected by the Affordable Care Act’s edict to take all comers regardless of their health status.

This picture of unprofitability from some of the nation’s largest insurers contrasts with an announcement last week from the U.S. Centers for Medicare and Medicaid Services that said per-member claims were flat from 2014 to 2015 for exchange enrollees, compared with a 3 percent increase for the broader health insurance market.

The federal government gets its data from the Affordable Care Act’s reinsurance and risk adjustment programs, which have collected broad information on all claims in order to reimburse programs that experienced higher-than-average patient expenses. The reinsurance program will go away next year and many organizations, including Covered California, have said insurers are announcing double-digit premium increases for next year to compensate for this change. Neither the insurance companies nor CMS has released full data sets on Obamacare claims, making it difficult for analysts to reconcile these seemingly contrasting pictures about the financial state of health exchanges.

Brian Blase, a senior research fellow at the Mercatus Center, a conservative think tank located at George Mason University in Virginia, said he believes insurers’ reported losses and their decisions to largely leave the exchanges have been brewing since 2014, the first year exchange policies took full effect. A recent analysis of 174 health plans operating in 2014 showed that premiums would have had to be 24 percent higher than they were in 2014 to cover costs, but that the disparity was erased by the government’s reinsurance program, according to the Mercatus study.

When asked why the recent CMS study indicates a very different scenario, Blase was blunt. “I think they did some gymnastics on how they counted or discounted claims. It is inconsistent with everything else I’ve seen and, frankly, I think that their analysis is inaccurate,” Blase said. He said the current negative pattern will likely deepen, eventually leading to repeal or significant modification of the Affordable Care Act’s insurance regulations. “You’re going to have rising premiums and lower choice. I think the political pressure next year to make changes will be significant,” Blase said. But others such as Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, a foundation that supports independent research on health care practice and policy, don’t see dire signs from the latest insurance developments. She noted that major carriers including Blue Cross, Blue Shield and Kaiser Permanente are not pulling out of exchanges. There is evidence, Collins added, that insurance risk pools tend to be healthier when they’re in larger states such as California. Long-term sustainability, especially where premiums are concerns, appears to be a function of size, which in turn lures multiple carriers who compete with each other for business. Collins said this means the estimated 1,000 U.S. counties with only one insurance carrier are likely to see more significant upward pressure on premiums in coming years, a situation that does, as Blase asserts, seem to suggest the federal government needing to step in. Ideas for intervention range from creating a “public option” similar to Medicare or special high-risk insurance pools to subsidize insurance to cover people with the most expensive medical needs.

Overall, though, Collins said the current information appears to indicate that Obamacare markets are maturing rather than dying. “It’s not surprising that we’re seeing some shake-up in the marketplace this year. There are going to be winners and losers like any competitive market you can think of. Some will compete and gain market share, others won’t,” she said. Additional information on the changes the Affordable Care Act has wrought in California will be forthcoming. The Kaiser Family Foundation is scheduled to release the fourth and final installment of its California health survey on Friday. The survey has tracked the effects of the law across the state since summer 2013. (c)2016 The San Diego Union-Tribune. Visit The San Diego Union-Tribune at www.sandiegouniontribune.com.

Online Doctor Visits in Spanish
Anthem Blue Cross members in California can use a tablet or smart phone for online visits from Spanish speaking doctors. Members can initiate video visits from their home or workplace at any time through a smart phone or tablet by downloading the free LiveHealth Online app. Online users have reported that the service has helped them save two to three hours to address a common health condition because they don’t have to go to a doctor’s office or urgent care facility. Doctors do not prescribe for controlled substances or lifestyle drugs. A summary of each visit is created and can be forwarded to their primary care doctor at the patient’s request. LiveHealth Online can also lessen the burden on primary care doctors who are feeling the pressure from the growing doctor shortage. Also, getting care early on can help reduce the severity and duration of many typical illnesses, such as the flu and infections. For more information, visit livehealthonline.com.


Getting on the Track to Financial Wellness
A study by Lincoln Financial finds that 55% of workers in the U.S. say they are on the right track to achieving financial well being. The study looked into the lives of the right-trackers, and found these five factors contribute to their feelings of financial security and financial success:

  1. 71% have created a financial plan.
  2. 98% are focused on the future.
  3. 78% exercise at least once a week.
  4. 63% feel good about themselves, which makes them more optimistic.
  5. 57% are enrolled in more than three non-medical benefits.

Employees define financial wellness in these terms:

  • 29% Being prepared for unforeseen events that could affect my
  • financial situation.
  • 27% Living comfortably and having control over day-to-day finances.
  • 25% Having financial freedom that allows me to enjoy my life.”
  • 19% Other.

For more information, visit http://newsroom.lfg.com/mood-of-america-special-report

LGBT Employees and Benefits: Impact of Marriage Equality
A year after the Supreme Court’s historic marriage equality ruling (Obergefell v. Hodges, June 2015), Lincoln Financial surveyed LGBT employees about their benefits. Since the ruling, 28% of the LGBT community overall, and 35% of those married or in a domestic partnership have reevaluated their workplace benefits, enrolled in a new benefit, or increased their contribution to an existing benefit. Thirty percent are making changes to their workplace benefits as a result of the ruling. But 50% are still unaware of how the ruling affects their benefits. Thirty-eight percent of LGBT employees who are married or in a domestic partnership are not aware how the marriage equality ruling affects their workplace benefits. The study also finds the following:

  • 14% of LGBT employees who are married or in a domestic partnership have enrolled in a new non-medical insurance plan.
  • 11% of LGBT employees have enrolled in a new health insurance plan.
  • 7% LGBT employees have made changes to their retirement plan by enrolling in a new plan or increasing contributions.
  • 51% of LGBT employees would like to speak with someone about their benefits.

For more information, visit http://newsroom.lfg.com/mood-of-america-special-report

Reducing Leakage in 401(k) Plans
A recurring issue with defined contribution savings plans, such as 401(k)s, is the risk of leakage — pre-retirement reductions in plan savings by workers, through loans, hardship withdrawals, or payouts during a job change. A 2014 analysis by the Employee Benefit Research Institute (EBRI) found that about two-thirds of the diminished retirement savings is associated with the cash-outs that sometimes occur during a job change. Loans from 401(k)s are sometimes blamed for a significant loss in retirement savings, but they actually account for the smallest amount of pre-retirement savings loss. Many workers see the option of taking a loan from their 401(k) as a major incentive to participate.

Speaking at a recent EBRI forum in Washington, D.C., J. Spencer Williams, president and CEO of the Retirement Clearinghouse, said that about 12.5 million Americans with defined contribution plans, such as 401(k)s, change jobs every year and have to decide what to move retirement savings to the new employer’s retirement plan if they can, move them to an IRA, leave them in the old plan, or take them out of the plan, which triggers a withdrawal penalty before age 59.5. Based on research and experience with employers, the Clearinghouse developed an engagement model with incoming and departing employees who have 401(k) balances of $5,000 or less. A near automatic rollover/transfer process would reduce retirement plan leakage by 50%. About 40% of the 12.5 million people who change jobs every year have less than $5,000 in their retirement account. Williams said, “Of the 1,500 retirement plan participants where they have been able to match accounts, the measured average account balance in the employer plan increases by about 45%. By creating this default path, we incubate those savings accounts.” Roadblocks to auto portability are achieving cooperation among 401(k) record keepers and getting the Dept. of Labor to agree with the negative-consent provision. For more information, visit ebri.org.


How Medicare Advantage Plans Can Increase Consumer Satisfaction
Medicare Advantage plans are more likely to achieve high satisfaction scores when they offer a consistent product message and brand experience and have control over the delivery of care, according to a J.D. Power study. Members frequently choose a plan they understand and find easy to work with. The study measures member satisfaction with Medicare Advantage plans based on six factors in order of importance: coverage and benefits (26%); customer service (20%); provider choice (15%); cost (14%); information and communication (13%); and claims processing (13%).

Improving communications with enrollees is one of the greatest opportunities for health plans to improve member satisfaction. It’s the only factor in the study that has not seen a significant improvement in member satisfaction. Valerie Monet, director of the insurance practice at J.D. Power, said that many plans have multiple product design features and come with technical manuals that are 20 pages or longer. Expecting members to be experts on these services and benefits is a losing battle for the plan and the member. Members expect their plan to provide guidance, ranging from assistance in selecting a doctor to helping them understand prescription costs.

Forty-eight percent of members agree strongly that their health plan is a trusted partner in their health and wellness, which increases satisfaction by 166 points. Satisfaction is 136 points higher among the 89% of members who completely understand how to find a doctor under the plan. Satisfaction is 110 points higher among the 88% of members who say their doctor spends the right amount of time with them.

Members expect immediate attention or advice when they call their health plan provider. Forty-one percent of those who called their plan had to give the same information more than once to get their issue resolved. Only 35% of members said that customer service provided all of the information they needed on the costs of prescription medications. Ninety-one percent of customers who are delighted with their Medicare Advantage plan (satisfaction scores of 901 or higher), say they will definitely renew their policy, and 89% will definitely recommend their plan to family and friends. Loyalty drops to 71% and advocacy to 66% among members who are pleased with their plan (scores of 751-900). Plans garnered the following member-satisfaction scores:

  • Kaiser Permanente 851
  • Highmark 791
  • Humana 782
  • UnitedHealthcare 775
  • Cigna 774
  • Aetna 773
  • Anthem 765
  • Health Net 756
  • WellCare 742

In 2016, members reported an average increase of $117 in annual premiums to $1,497. They also have more out-of-pocket expenses. On average, member deductibles are $1,705 in 2016, a $310 jump from 2015. Satisfaction is 136 points higher when members completely understand their out-of-pocket costs. Monet said that members are more satisfied and see the value of their plan when they have a better understanding of how much they are paying and what the costs cover.” For more information visit http://www.jdpower.com/resource/us-medicare-advantage-study.

Older Americans Oppose Approval Process for Home Care Services
Eighty-three percent of seniors oppose a Medicare policy that requires a government contractor to approve claims for physician-prescribed home health care, according to a poll sponsored by Bring The Vote Home. The Centers for Medicare & Medicaid Services (CMS) recently implemented a pre-claim review demonstration that imposes documentation requirements on home health agencies and referring physicians. Doctors have to provide a broad array of eligibility-related documentation and clinical support for review by government contractors. Home health leaders warn that the new requirements could delay care and increase healthcare costs. Seniors say that requiring a government contractor to approve home heath care will have the following results:

  • 80% say it will delay care.
  • 77% say it will increase Medicare costs.
  • 75% say that will increase out-of- pocket costs.
  • 45% say it will decrease fraudulent home health claims.

For more information, visit bringthevotehome.org.

Prescription Drug Use Rises for the Newly Insured
People who gained health coverage under the ACA sharply increased their use of prescription drugs. Also, their out-of-pocket drug spending dropped significantly, according to a Rand study. There was a 28% increase in prescriptions filled among those who gained private insurance and a 29% reduction in out-of-pocket spending per prescription compared to when they were uninsured during the previous year . Those gaining Medicaid filled 79% more prescriptions and paid $58 less out-of-pocket per prescription. People who had one of five chronic condition categories studied (diabetes, high cholesterol, anxiety or depression, asthma or chronic obstructive pulmonary disease, and hormone therapy for breast cancer) sharply increased the number of prescriptions filled after gaining coverage, but had lower annual out-of-pocket expenses. For example, people with high cholesterol who gained private coverage had $200 lower annual out-of-pocket spending while those newly covered under Medicaid had $359 lower out-of-pocket spending. Researchers found a 30% drop in the number of uninsured from 2013 to 2014. States that opted to expand Medicaid by early 2014 had significantly larger declines in uninsurance rates (39%) compared to states that had not (23%). The findings are published online by the journal Health Affairs. For more information, visit rand.org.

Most Companies Pay at Least 5% More for Health Insurance Premiums in 2016
A survey of more than 3,000 U.S. employers finds that 54% are paying at least 5% more for employee medical insurance this year. Nearly one in four has seen increases of at least 10%, according to a study by Arthur J. Gallagher & Co. Sixty-seven percent say that medical and pharmacy benefits are the cornerstone of their employee benefit package and an important tool to recruit and retain talent in a tightening labor market. Telemedicine, now used by 24% of employers, is predicted to reach 42% in 2018. Narrow network healthcare plans show a growth trend from 18% to a predicted 27% in 2018. A rise in adoption of consumer directed health plans is expected from 36% to 51% in 2018. Self-insuring is expected to grow from 28% to 38% in 2018. Fewer than 5% of employers have used a private exchange, but that figure is expected to triple by 2018. Employers that excel at healthcare cost management take a comprehensive, data-driven and multi-year approach to compensation and benefit planning. However, just 8% of employers do multi-year planning with multiple data inputs. Seventy-six percent plan their benefits year-to-year, which puts them in a reactive position and less able to manage costs. For more information, visit ajg.com/NBS2016.


Insurance Agents Are Slow to Go Digital
More than half of individual insurance agents lack key digital tools and automation, such as client portals, mobile apps, and claims downloading. Fewer than half use text messages, social networks, instant messaging, and e-newsletters. Only 8% of agents say that their websites are excellent with 60% saying that their sites are average to poor. Many sites lack functionality, with less than a quarter offering quoting capabilities. Many agents are still using traditional modes of communication to connect with clients, such as phone, e-mail, and fax, according to the Insurance Digital Transformation Survey. The survey comes from the Independent Insurance Agents & Brokers of America, the Council for Technology, ACORD, and Professional Insurance Agents. Greg Maciag, president emeritus of ACORD said, “Many agents want to become digital, they just need guidance on where to start.”

Forty-three percent of agents operate 24/7 using staff, automation, or a combination. Twenty-three percent have client portals, and 21% have mobile apps. Agents are further along when it comes to social media with 78% using Facebook and 68% using LinkedIn. Nearly three-quarters of agents say that they regularly get new business leads from the web and social media.

Seventy percent have strategies to implement new technology, but adoption has been slow. With an overwhelming number of options, many don’t know where to start or need help evaluating the return-on-investment of new technologies. Digital tools can play a critical role in winning new customers and strengthening relationships with clients. Most agents say that their clients are not asking them for a client portal or mobile app. But Mike Becker, executive vice president and CEO of PIA says that that does not mean that clients don’t want them. “Agents can’t assume that no news is good news…Many financial institutions did not know how popular online and mobile banking would be with their customers until they adopted it. The same is true for insurance. These technologies provide quick, easy, and on-demand access to policy and billing information, quoting, and rating.”

Is Wearable Technology the Next Big Step in Insurance Analytics?
by Michael Macauley
From headsets to wristbands to smart watches, wearable tech is growing and shows no signs of stopping – and insurance companies have taken notice. According to a PwC report, 20% of Americans already own a wearable device. If you don’t own one yourself, chances are that you know someone who does. Wearable technology collects information about everything from your driving, eating, exercise, sleeping, and other habits, which provides invaluable insight to third parties, like your insurance company. This access to data has a huge impact on how insurance companies develop customer plans. For example, when a health insurance company gets data from your Fitbit or Apple Watch on your healthy lifestyle, you could be eligible for a reduced rate. This level of technology helps companies know what kind of lifestyle the customer lives, and can help them shape their policy to the customer. One-third of insurance executives use wearable technology. Sixty-three percent expect the the insurance industry to adopt the technologies broadly in the next two years.

Nearly 22% of health insurance carriers are developing wearable devices to track consumers’ physical activity or vital signs, allowing them to offer lower rates to those who maintain a healthy lifestyle. A baby pacifier that can monitor a baby’s activities and a wearable tattoo with embedded chips are just a couple of examples of how far the technology has come. Auto insurance carriers are using a variety of tools to gain driving data. Carriers can track driving habits through devices insureds attach to their cars, from OnStar, from phone apps, and more. The tools display factors like speed, tendency to break suddenly, rate of acceleration, and number of miles traveled.

But using wearable technology benefits auto insurance consumers. The stereotype is that teen drivers are the riskiest to insure because of reckless driving habits and inexperience. But young drivers who practice safe driving are unfairly burdened with high premiums because of their age alone. With technology like Progressive’s Snapshot, insurers can monitor driving habits to provide a more personalized and fair insurance plan. Progressive employee Dave Pratt proved this concept by having his teenage son install Snapshot in his new Jeep. Although this scenario (teen boy in a new car) typically calls for a high premium, his safe driving behavior—monitored by Snapshot—earned him a much lower premium.

Automakers like Lexus, Chevrolet, Hyundai and Ford have developed built-in systems that track driving while companies like Lytx, Drive Pulse, and License+ have created their own data collecting devices. Allstate Insurance has already implemented a Drivewise program, in which a monitoring device is installed under the dashboard to monitor driving behavior. Metromile, recognizes that the amount of traveling a driver does is a predictive factor for accidents, and therefore offers premium savings of up to $500 per year to drivers who travel 200 miles or less per week. And the list goes on.Monitoring drivers’ behaviors (and incentivizing good driving with lower premiums) is likely to make the roads much safer, but it also raises significant concerns over privacy and data security.

Wearable tech and monitoring devices create some yet-to-be-answered privacy concerns. Eighty-two percent of consumers who buy the devices are concerned about an invasion of privacy and 86% are concerned about security breaches. With the advancement of wearable technology and monitoring devices, it is vital that insurance companies respect the privacy of their insureds and use this growing access to data for the benefit of drivers.

Michael Macauley is CEO of Quadrant Information Services. Quadrant is headquartered in Pleasanton, CA and provides pricing analytics solutions for property and casualty insurance companies. Quadrant gives actuary, product development, pricing, sales, and marketing personnel at its client companies—which include all the major insurance carriers in the United States—the data they need to make accurate, data-driven decisions.