Zenefits CEO Ousted Over Allegations That Employees Sold Insurance Without a License
Parker Conrad, CEO and co-founder of Zenefits, has resigned amid allegations that employees sold insurance without holding proper licenses. COO David Sacks will take over as chief executive, reports The San Francisco Business Times.
The state of Washington is investigating allegations that employees acted as insurance brokers without holding proper licenses. More than 80% of insurance policies sold in Washington State through August of last year were sold by Zenefits staffers who didn’t have brokers’ licenses in the state, BuzzFeed reports, citing data from a public records request.
In the email to employees, Sacks said that many internal compliance controls have been inadequate, and some decisions have just been plain wrong. Sacks added that the problem goes much deeper than just process, calling Zenefits’ culture and tone inappropriate for a highly regulated company.
The San Francisco Business Times says that the allegations mirror complaints by insurance brokers that Zenefits was bending or ignoring the same rules that they were expected to follow. In the second half of 2015, growth stalled and questions about Zenefits’ approach grew, with Washington State’s insurance commissioner Mike Kreidler’s office confirming, in mid-November, that Zenefits was being investigated for possibly selling insurance without proper licenses. Sacks said the company is appointing Joshua Stein, who had been vice president of legal, as its first chief compliance officer.
Will Healthcare.gov Get A California Makeover?
by Pauline Bartolone, CALMatters www.Californiahealthline.org.
The federal government — in pending proposed rules for 2017 — has signaled it too wants to have more of a hand in crafting plans. Though there are no plans to go as far as a monthly drug copay cap, healthcare.gov would be forging ahead on a path California already paved, swapping variety for simplicity in plan design. “Not letting [health] plans define what’s right for consumers, but defining it on behalf of consumers … is a better model for the market,” said Peter Lee, executive director of Covered California. “We want to make sure every consumer has good choice but not infinite choice,” said Lee.
Most other states, including those in the federal exchange, haven’t subscribed to that idea so far. They have a clearinghouse model, in which all health insurers and plan designs are accepted as long they comply with the Affordable Care Act. That can mean the same insurer offers multiple plans with slightly different premiums, deductibles, and copays. Even within one metal tier, say silver, the same insurer might offer half a dozen slightly different plans. (Obamacare plans come in four tiers, from bronze, with the most limited benefits, to platinum, with the most.)
Now, the federal government proposes to create standard cost-sharing designs in various metal tiers and make them easily accessible on healthcare.gov. And it’s considering how to improve “value” by being more selective about plans. A simplified marketplace, the feds say, will make it easier to choose high-quality health insurance.
“Many consumers … find the large variety of cost-sharing structures available on the Exchanges difficult to navigate,” the proposed rules say. “We believe that standardized options will provide these consumers the opportunity to make simpler comparisons.”
The proposal signals a big change. “Up until now the federal marketplace has really taken a hands-off approach” in shaping the marketplace, said Sabrina Corlette, research professor at Georgetown University’s Center on Health Insurance Reforms. “The new proposed rule says we actually are going to become more of an active purchaser.’”
Covered California holds insurers to a higher bar than what’s required under the Affordable Care Act. It negotiates premium prices down and requires quality goals to be met. Health plans must participate in health-disparity workgroups, collect information about enrollees’ health status and monitor rates of preventive health services use. In the first two years, California’s exchange rejected multiple health insurance carriers.
Covered California says it’s the only exchange in the country that requires all plans to be standardized (not just some, which the federal government is proposing). All gold tier plans, for instance, have the same costs for lab tests, doctors’ visits and deductibles.
“There was always a suspicion like ‘Oh, is that plan $80 more a month because it covers more?’” said Anthony Wright, of the advocacy group, Health Access. “And it was almost impossible to know. Whereas now people know ‘Okay, these are basically the same plans.’”
Price negotiations with insurers have paid off, according to Covered California. During 2016 plan year negotiations, insurers reduced premiums by 1% to 9%, said Lee. The exchange says this will result in $200 million in savings for premium payers and taxpayers this year.
Covered California average premium increases have been on par with or lower than the increases in other states, according to the private health care consulting firm, Avalere Health. It says this year’s 4% average increase was particularly low in comparison. But national researchers say the downward pressure on premiums may be more indicative of competition than the exchange’s negotiating power.
“It’s unusual to have four big insurers jockeying for market share like we have in many parts of California,” said Larry Levitt, Senior Vice President at the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)
Health insurers in California acknowledge there’s more red tape if they sell in the subsidized marketplace there, but surprisingly, they don’t complain. In fact, a California insurance trade group says it sees the exchange as a “partner,” and active purchasing as valuable for establishing ground rules. “So far in California, it has worked,” said Charles Bacchi, president and CEO of the California Association of Health Plans. The rules allowed new plans to get into the individual market, he says, and provided “more security in knowing what the playing field was.” At the same time, Bacchi said, health plans don’t always agree with the exchange’s decisions. “There is give and take,” he said.
Blue Shield of California, which in 2015 had 25% of the exchange’s enrollment, says it’s very happy with its relationship with Covered California. Applying to sell through Covered California creates “different work” than was required before, said Ken Wood, Senior Vice President of Consumer Markets at Blue Shield of California, adding that he applauds its approach. But the business is worth it, he said. Covered California gives insurers access to more than a million consumers, whose monthly premiums are largely subsidized by government. And “the standard benefits is an enormous simplification for consumers,” he said. But one of the two health insurance regulators in California, the state Department of Insurance, said Covered California’s strict guidelines might not benefit consumers. It has created a situation in which the exchange “has fewer carriers than would otherwise be the case,” said Janice Rocco, deputy commissioner of the California Department of Insurance.
More insurers in the marketplace for the first two years would have had an impact on price in the long term, said Rocco. Federal administrators may be trying to adopt active purchasing rules before the new presidential administration takes office, said Corlette, and California’s example may make it more politically feasible. “There’s no question that the feds are closely watching the California experience,” said Corlette, commenting on Covered California’s ability to keep insurers in the marketplace and hold down premiums.
The federal rules also name other active purchasing exchanges as models however, including New York, Massachusetts and other state-based exchanges.
Health insurers on a national level are “strongly” opposed to an active purchaser model for states served by healthcare.gov, including standardized benefits. “It could discourage many from enrolling if they can’t find a policy that works best for them,” said Clare Krusing from America’s Health Insurance Plans. “Where there is competition and choice is where consumers benefit and where health plans benefit,” said Krusing.
Researchers raise other logistical and market concerns. Caroline Pearson, senior vice president of Avalere Health, said the risk of losing insurers under active purchasing is “significant.” “Right now the federal government needs to focus on increasing enrollment and maintaining plan participation,” said Pearson. Streamlining benefits like medical service copays could get tricky when spanning across more than 30 states with different economies, said Corlette.
Not all of Covered California’s actions have been met with applause. Consumer advocates say they’re still concerned about the high deductible in Covered California’s Bronze plans, an amount the exchange chose to raise for 2016 plans. But at the same time, advocates appreciate that policy decisions aren’t being made in the “back room of an insurance company.” “Covered California has put itself apart from other states in that it is willing to be aggressive and do what’s right,” said arthritis patient and advocate Charis Hill. She said she’s glad Covered California reminds insurance companies that they exist to serve patients: “If they’re not doing their job, then somebody’s going to step in.”
Insurance Regulation Shifting Toward Managed Care Agency
by David Gorn www.californiahealthline.org
The regulation of health insurance in California is shifting dramatically toward the Department of Managed Health Care, whose share of the commercial market has mushroomed in recent years. The change has come at the expense of the other agency in the state’s unusual bifurcated system, the California Department of Insurance, whose authority over commercial health plans plummeted from 20% of the market to about 12% between 2012 and 2014 — the most recent data available.
For a variety of reasons, the shrinking of the insurance department’s responsibilities is likely to continue, according to Katherine Wilson, CEO of Wilson Analytics, a health care consulting firm based in San Francisco. “It’s a huge shift, particularly in the individual market,” Wilson said. “And the change in the small-group market is huge too, just not as big.” In 2012, the insurance department regulated 71% of the individual market; by the end of 2014, that figure had plunged to just 18%. California is the only state in the U.S. with dual health insurance regulators.
Critics of the state’s divided approach note that it dilutes regulatory power by giving the insurance companies a wedge between the two agencies and creating needless inefficiencies in health care and how it’s paid for become increasingly complex.
“This dual structure contributes to consumer confusion, government and insurance carrier administrative burdens, and difficulty in monitoring what is being bought and sold in the insurance marketplace,” according to a 2011 paper by the Kelch Policy Group, published by the California Health Care Foundation. It also complicates the taxation of insurance companies: taxes on health plans regulated by the managed care agency are lower in many cases than they’d be if the same health plans were governed by the insurance department — an issue that is wending its way through state courts.
The Department of Insurance, led by Commissioner Dave Jones, has authority over old-fashioned indemnity plans and some PPOs. The managed care agency traditionally regulates HMOs, but recently it has picked up some types of PPOs. That has blurred the regulatory line between the two agencies. Perhaps more important, it has allowed some insurance companies the flexibility to essentially choose their regulator in many cases. That is a contributing factor in the shift of health plan supervision away from the insurance department.
Health insurers have said that consolidating policies under DMHC’s jurisdiction is more about achieving operational efficiencies and that the regulatory requirements are just as rigorous as insurance department rules.
But it’s also the case that some insurers feel uncomfortable with Jones, who is an elected politician with ambitions for higher office and does not shy away from public confrontation with the industry -– though as the data show, his influence over insurance companies is contracting.
Shelley Rouillard, appointed by Gov. Jerry Brown, has been director of the managed-care agency since December 2013. She has pursued several high-profile enforcement cases against health plans, including the failure to provide adequate mental-health treatment and giving patients inaccurate provider directories.
Neither agency, however, has the power to stop insurers from raising premiums, no matter how large the increases. Legislative efforts have been made to change the regulatory structure. Last session, for example, Assembly member Kevin McCarty introduced a bill that would have put all PPO insurance products under purview of the Department of Insurance. That proposal went nowhere, but it is a two-year bill so it could return during the legislative session. More likely, the Department of Managed Health Care will continue to assume a growing regulatory role, Wilson said. Over the years, there have been calls to end California’s bifurcated health insurance regulation, but if the trend continues it may resolve itself, she said. “It would be sort of a de facto single regulator.”
Blue Shield ACO Achieves Cost Savings
Blue Shield of California says that its Accountable Care Organization (ACO) program has achieved more than $325 million in healthcare cost savings in its first five years. In 2010, Blue Shield was the first California health plan to collaborate with hospitals and medical group providers to deliver more efficient care in the most appropriate setting. It started with Dignity Health and Hill Physicians in Northern California. The company now has 35 ACOs serving more than 325,000 Californians and available to nearly 200,000 additional residents throughout the state, including the San Francisco Bay Area; Sacramento region; Los Angeles, Orange and San Diego counties; the Inland Empire and San Joaquin Valley.
Securian Delivers Another Year of Strong Growth
Securian Financial Group generated strong financial results again in 2015, with revenue increasing 9% and performance on all key metrics exceeding or nearly matching last year’s record results. Securian reports the following:
- Top-line revenue increased 9%. Over the past four years, Securian’s revenue has increased at an 11% compound annual growth rate.
- Insurance in force increased 7%.
- Assets under management increased 2%.
- Insurance sales were $1.1 billion, matching 2014’s results.
- Annuity sales, which include annuities sold to individuals and retirement plans sold to employers, increased 10%.
- Statutory capital increased 5%, maintaining a capital level considered excellent by rating agencies.
- Earnings were $273 million, nearly matching last year’s company record of $279 million.
- All Securian business lines retained 90% or more of its clients.
- Fitch upgraded the ratings of Securian’s insurance company affiliates—Minnesota Life and Securian Life—to AA (from AA-) with a stable outlook, citing Securian’s strong balance sheet fundamentals and conservative risk profile.
- Standard & Poor’s revised the outlook for Securian’s insurance companies to positive (from stable) and affirmed its “Strong” rating, citing Securian’s increasingly stable and diversified earnings profile and growing contributions from strategic affiliates.
For more information, visit www.securian.com/ratings.
Wealth Insight Products And Services
Private Client Resources offers a suite of new products with real-time views into data quality, service utilizations, client experience, and highly customizable web-based analytics. Private wealth management firms can select the products and services they want. They will be able to determine how much of the process they wish to outsource—and to what degree—along a range of products and services that offer unparalleled transparency and flexibility. For more information, visit www.pcrinsight.com.
BenefitMall Makes W-2s Easily Accessible for Payroll Clients
BenefitMall has partnered with TurboTax to help payroll clients view, print and download their W-2 information quickly and easily this tax season. If BenefitMall’s payroll clients choose to use TurboTax to file their 2015 tax returns, their employees will not have to worry about entering their W-2 information since it will already be synced with the service. During the questionnaire process with the TurboTax software, the employee will be asked if they would like to download their payroll information. If the employee agrees, their W-2 data will be securely loaded into their tax return. This relieves the burden of having to manually enter the required data when filing. For more information, visit www.benefitmall.com.
Free Access to National Medicare Supplement Sales Day in Kansas City
Medigap sales pros and industry experts are gathering in Kansas City for the 2016 National Medicare Supplement insurance industry conference April 25 to 27. On April 25, there is a free one-day program on selling Medigap. For more information, visit http://www.medicaresupp.org/2016-free.php.
Health Insurance Conference
Businessolver is holding two-day Vision 20/16 User Conferences in three cities across the nation. Each conference will feature in-depth discussions and strategy sessions on the Affordable Care Act, consumerism, employee education, the high-deductible health plan boom, and more. Businessolver will also present its online benefits enrollment software and its user interface design before its launch later this year. The following are locations and dates for the conferences:
- April 4-5, 2016 – Four Seasons Hotel, Las Vegas
- May 17-18, 2016 – Hotel Sofitel, Philadelphia
- June 29-30, 2016 – Hotel Allegro, Chicago
For more information, visit www.Businessolver.com.
Key Trends in Online & Mobile Innovation
Corporate Insight released its annual Monitor Awards from 2015, including major trends from the year in online and mobile innovation. Financial firms in every industry redesigned or entirely revamped their public and private websites, with many prioritizing improved site navigation and integrating responsive design to enhance the experience across devices.
Firms also continued to use micro sites to host educational resources, and promote products and investment strategies outside of their main sites. Firms added features to their mobile apps in 2015, with one of the major advances in technology being the addition of Touch ID login capabilities for apps. Online and mobile payments also remained an important focus for many financial firms in 2015. The second half of the year saw an influx of mobile payment technologies from Android, Samsung, and Chase Bank following the successful Apple Pay launch in 2014. Another notable trend of 2015 was the rapid growth of automated or semi-automated investment platforms – also known as robo-advisors – in the brokerage space. For more information visit corporateinsight.com/monitorservices/monitor-awards
Unemployment Benefits Actually Help the Economy – And the More Generous the Better
Research from Columbia Business School provides evidence that unemployment insurance helps stabilize the economy – and the more generous the benefits are, the better. As demand for products and services decline due to unemployment, the unemployment insurance allows for continual cash flow in the community, which can help preserve regional and local economic activity even in the face of mass layoffs. The more generous the unemployment insurance benefits are, the better the region fares.
Marco Di Maggio, co-author of the study and professor at Columbia Business School said, “We compared differences in the generosity of each states’ unemployment insurance programs. Our findings show that unemployment insurance appears to have a beneficial effect on the economy by decreasing its sensitivity to economic shocks and reducing the variability in total income, employment in the non-tradable sector and durable consumption.”
Di Maggio, and his co-author Amir Kermani from the University of California at Berkeley found that counties in states with more generous unemployment insurance react significantly less to economic shocks driven by falling demand. For more information, visit www.gsb.columbia.edu.
PBMs Say They Increase Competition and Reduce Rx Costs
Testifying before the House Committee on Oversight and Government Reform, Pharmaceutical Care Management Association (PCMA) president and CEO Mark Merritt outlined ways to increase competition and lower prescription drug costs. The Committee is examining methods and reasoning behind recent drug price increases at a hearing titled, Developments in the Prescription Drug Market.
PBMs administer prescription drug plans for more than 266 million Americans who have health insurance from a variety of sponsors including: commercial health plans, self-insured employer plans, union plans, Medicare Part D plans, the Federal Employees Health Benefits Program, state government employee plans, managed Medicaid plans, and others.
PBMs are projected to save employers, unions, government programs, and consumers $654 billion—up to 30%—on drug benefit costs over the next decade according to new research. PBMs reduce drug costs by doing the following:
- Negotiating rebates from drug manufacturers.
- Negotiating discounts from drugstores.
- Offering more affordable pharmacy channels.
- Encouraging use of generics and more affordable brand medications.
- Managing high-cost specialty medications.
- Reducing waste and improving adherence.
Merritt said, “There is a growing use of bait-and-switch copay assistance marketing programs that encourage patients to ignore generics and start on more expensive brand drugs.” Unlike programs for the poor and uninsured, copay offset programs are designed to encourage insured patients to bypass less expensive drugs for higher cost branded drugs. Such practices are considered illegal kickbacks in federal programs and have long been under scrutiny by the Health and Human Services Office of Inspector General (OIG).
PCMA outlined several potential solutions for high drug prices that policymakers could consider, including:
- Accelerating FDA approvals of “me-too” brands against drugs that face no competition.
- Accelerating FDA approvals of generics to compete with off-patent brands that face no competition.
- Creating a government watch list of all the off-patent brands so potential acquirers are aware that policymakers can monitor these situations.
- Making copay coupons an illegal kickback for all insurance that gets any federal subsidy.
For more information, visit http://www.pcmanet.org/
Small Business Owners Predict a Retirement Crisis
An overwhelming majority of small-business owners say that the country is in the midst of a retirement crisis. The online study, commissioned by Nationwide and conducted by Harris Poll, found that 84% of small business owners say American workers are facing a retirement readiness crisis. However, 60% of small-business owners say that their own employees are on track to retire. Sixty-three percent of small business owners say it’s important for a business owner to provide retirement benefits, but only 34% offer these benefits to their employees.
Small businesses play an outsized role in helping workers prepare for retirement. According to the U.S. Small Business Administration, small businesses make up 99.7% of all employers, employ 49% of all private-sector workers, and create 63% of the new private-sector jobs in the country.
Joe Frustaglio of Nationwide said, “We’ve reached a point in this country where people are starting to pay attention to the fact that a retirement savings problem exists. Employers need to provide access and education, and workers need to take advantage of what’s available to them.”
Sixty-seven percent of small-business owners who offer retirement benefits, including 401(k)s, plan to increase their contribution to employees’ 401(k) plan. Thirty percent of small-business owners who don’t offer retirement benefits plan to offer these benefits in the future. If that happens, 54% of small-business owners will offer their employees retirement benefits.
Half of small-business owners who plan to start offering retirement benefits say they will do so because they expect sales or revenue to increase in the next 12 to 24 months, and 32% say the U.S. economy will improve in the same timeframe. Small business owners who offer 401(k) plans and say they will increase contributions have an even more positive outlook: 56% expect company sales or revenue to increase in the next 12 to 24 months, and 53% say the U.S. economy will improve in that same period.
“In spite of recent market volatility, economic indicators are pointing toward continued growth for the U.S. economy in 2016. Small business owners should see Main Street benefit from the economic stability that we’ve enjoyed during the last few years,” said David Berson, senior vice president and chief economist at Nationwide.
Twenty-five percent of small-business owners who plan to offer retirement benefits in the future say the ACA has made health benefits less attractive to employees, and 18% say the ACA has decreased company health care costs. Thirty-three percent of small-business owners who offer retirement benefits and plan to increase company contributions to their employees’ 401(k) plans say the ACA has made health care benefits less attractive to employees, and 30% say the ACA has decreased the company’s health care costs. “Lower health care costs means small business owners have the option of contributing more to their employees’ retirement.
As the ACA makes health care benefits less relevant to small business employees, business owners have to find a new way to recruit and retain employees. There is mounting evidence that 401(k) plans are filling that role,” said Frustaglio.
Fifty-nine percent disagree that retirement benefits are not important for attracting and retaining employees. Forty-two percent of those who plan to increase contributions say that their company’s 401(k) plan is now more important for attracting and retaining employees as a result of the ACA. Twenty-four percent of small business owners who will offer retirement benefits in the future say their company’s 401(k) plan is now more important for attracting and retaining employees because of the ACA.
“As the health care insurance marketplace becomes more commoditized, employers are looking for new tools to attract and retain key employees, Employers who are using 401(k) plans as a recruitment tool are ahead of the game because we’re seeing more company owners asking how they can do this,” said Frustaglio.
He adds that small business owners who are not offering a 401(k) plan to their employees should talk to a financial advisor about finding a plan that’s right for their employees and business. Eighty percent of small business owners say they cannot compete with a Fortune 500 company’s benefits, and 48% say they could afford a customized 401(k) plan to meet their small business needs.
Frustaglio said, “Small companies not being competitive with large corporations in terms of employee benefits is just not true in today’s world. No matter the size of the business, from one with 33,000 associates like Nationwide to the corner grocery store, today’s 401(k) plans allow for customization and access to the same options with the same tools for all employees.”
Frustaglio recommends that small business owners who offer retirement benefits to their employees do a plan review every year with their advisor. The review should include an analysis of the plan’s components and investment options for their employees. For more information, visit www.nationwide.com.