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IN CALIFORNIA
Governor’s Budget Would Have Far Reaching Effects
Gov. Arnold Schwarzenegger’s proposed budget would bring the most profound rollback of California health protections in state history, according to a report by Health Access California. Permanent policy changes would increase the number of uninsured from 6.5 million to 7.5 million while reducing benefits or access for another 3.6 million low-income Californians who depend on public programs.
Cuts would result in the following:

• A rollback of eligibility for low-income working parents down to 61% of the poverty level, from 100% of the poverty level.
• Additional paperwork burdens for children and adults designed to reduce enrollment.
• Suspension of recently passed legislation that would ease enrollment burdens on children.
• Increased premiums for low-income families with Healthy Families coverage. 

The group says that Schwarzenegger’s budget would cause the following: 

• 2.5 million adults with incomes of less than $1,000 to lose access to vital benefits such as dental care, podiatry, glasses, and incontinence creams and washes.
• 955,000 children in Healthy Families would pay premiums that are as much as 77% higher and they would pay more per doctor’s visits or prescription drugs. (60,000 children could also lose coverage as a result of this increase.)
• 80,600 legal immigrants would see their comprehensive health benefits scaled down to four basic services: emergency, pregnancy, some long-term, and some cancer care.
• 39,000 children with genetic or chronic conditions would lose coverage and access to medical care because there was not enough staff to ensure their cases were properly monitored. 
• 22,000 undocumented immigrants would lose their access to emergency care as a result of monthly reporting requirements. For more information, visit www.health-access.org.

NEW PRODUCTS
Limited-Benefit Plans
CIGNA introduced its Starbridge Advanced Medical Plans for management level or highly skilled hourly employees. These plans can also be used as waiting-period coverage for employees awaiting traditional major medical coverage. Employer contribution is required and pooled national rates ensure affordable pricing. The plan also offers access to CIGNA’s PPO network, which features deep discounts from thousands of providers nationwide. For more information, visit www.cigna.com.

Index Interest Universal Life
AIG American General introduced AIG Elite Global Plus and AIG Elite Global Survivor. Along with a global indexing feature, the two products offer increased allocation options, greater case design flexibility, monthly index options, a no-lapse guarantee of 30 years or to age 90, and strong look-back illustrated rates. For more information, visit www.aigag.com/EliteGlobal.

Variable Annuity
Transamerica introduced a variable annuity that offers lower costs and a new pair of ETF-based subaccount choices. “Transamerica Principium II” includes the same benefits and features available with the majority of Transamerica’s variable annuity suite with limited investment options. For more information, visit www.transamerica.com.

Term Life
Old Mutual is offering “Value Select,” a super-preferred term life insurance product. It provides a level death benefit and rates that are fully guaranteed to remain level for the term period. It is available in 15, 20, and 30 year periods. 

HEALTHCARE
More Americans Seek Health Info Online
A study by the Center for Studying Health System Change (HSC) reveals that more Americans are doing their own research on health, especially on the Internet. In 2007, 56% of American adults sought information about a personal health concern from a source other than their doctor. That’s up from 38% in 2001. More than half of those who researched health concerns said the information changed their approach to maintaining their health and four in five said that the information helped them to better understand how to treat an illness or condition. Consumers’ use of the Internet for health information is now on par with their use of the more traditional sources, such as books, magazines, and newspapers. Those more likely to research health information are those with two or more chronic conditions, women, younger consumers, people with higher incomes, and whites and African Americans compared to Hispanics. For more information, visit www.hschange.org.

Hispanics Need Education as Well as Health Coverage
To help Hispanics, national health reform must include more than just expanded access to health insurance, according to a statement by the president of the National Hispanic Medical Association, Dr. Elena Rios. “We need ‘health reform plus’ with a big boost in health education…and more training in cultural sensitivity for healthcare providers. “We need the nutritionists and the educators to be part of the team. Education about diabetes and preventing obesity is crucial to Hispanics,” she said. Health communications need to be targeted to Hispanics younger than 30. Such health education messages should be appropriate for those with low literacy skills as well as for those who speak English and Spanish, she added. “There’s got to be a new media approach using the Internet and cable and social marketing,” she said. For more information, call 202-628-5895 or e-mail nhma@nhmamd.org

Healthcare Retail Clinics Make Their Mark
Affordable and convenient healthcare has become more available to average Americans as a result of the proliferation of retail clinics, according to a report by the Heartland Institute. The number of retail clinics operating in the U.S. has surged in the past three years from fewer than 50 in 2005 to more than 1,000 today. These clinics are expected to expand their scope of treatments to include chronic disease management, injections (some already offer influenza vaccinations and other injection services), weight loss counseling, and more.

They now offer basic acute care services and preventive care. They also provide clearly posted prices and on-the-spot fee-for-service billing. Many clinics accept insurance as well charging standard co-payments for care. The clinics also provide a non-emergency room and non-community-clinic option for uninsured Americans.

Policymakers should acknowledge their role in healthcare provision but also be careful not to create laws that stifle these innovations, according to Heartland.
Some experts believe the retail clinics are catching on because of the shortage of family physicians. In the next 15 to 20 years, the deficit is expected to reach as many as 200,000 physicians -- 20% of the needed workforce, according to Dr. Richard Cooper, a professor of medicine at the University of Pennsylvania. The spread of retail clinics will mean that family physicians will have to evaluate how convenient their practices are for patients. They will most likely need to make some changes to be more user-friendly, said Dr. Larry Fields, president of the American Association of Family Physicians. For more information, visit www.heartland.org.

The Candidates’ Competing Healthcare Visions
The Council of Affordable Health Insurance (CAHI) prepared a detailed analysis of the healthcare platforms of presidential candidates Barack Obama and John McCain. The healthcare system is transitioning to a consumer driven system. But federal efforts can stop that trend if the government begins to dictate benefit designs and provider practices, according to CAHI. Senator Obama believes that a strong government hand is needed to force the system to work for everyone, while Senator McCain wants to relax some of the regulatory framework to increase competition and choice.
Obama wants to do the following:

• Swell government programs such as Medicaid, Medicare, and the State Children’s Health Insurance Program (SCHIP), probably by expanding the eligibility.
• Provide subsidies for low-income people to buy coverage.
• Provide small businesses with a tax credit for up to 50% of the premiums they spend on health insurance. 
• Reimburse employers for a portion of their catastrophic health care expenses
• Create a national health insurance exchange (similar to the Massachusetts health insurance Connector) so consumers can shop among private plans.
• Create a public program that includes comprehensive benefits similar to the health plan offered to federal employees, subsidies and portability.
• Require employers to share the cost of insuring workers or pay into a national plan
• Require children to have coverage.

In contrast to Obama, McCain believes that government-run programs like SCHIP should be limited to low-income families. He also says he wants to slow the growth of Medicare and Medicaid through comprehensive reforms.

Can Obama’s plan save consumers the kind of money he has suggested? “Count us as skeptics,” say the folks at CAHI. “Does anyone really think the government will significantly reduce administrative waste?” CAHI says that Obama’s plan lacks a way to encourage people to be value-conscious shoppers in the healthcare marketplace. Obama wants to impose significant new requirements and regulations on health insurance. But, insurers may decide that they can no longer offer certain types of coverage including high deductibles, health savings accounts, and certain types of limited-benefit policies. Obama wants to prohibit health insurers from denying coverage (guaranteed issue). However, the six states that have implemented guaranteed issue in the individual market have the highest health insurance premiums in the country.

Obama supports legislation allowing the importation of prescription drugs from other countries and allowing the federal government to negotiate drug prices. McCain also supports the importation of prescription drugs from other countries. So far, counterfeit drugs have had little effect on U.S. patients, but opening up the system to foreign drugs will put Americans at risk.

John McCain’s boldest proposal is to restructure the tax treatment of health insurance. Single workers would get a $2,500 refundable tax credit (not a deduction) and families would get a $5,000 credit. McCain said the tax credit may be risk rated, such as being larger for those with serious medical conditions to offset the additional health insurance costs.

Like Obama, McCain wants to give states the flexibility to experiment with reform, but that flexibility would likely have a stronger free market component. Unlike Obama, McCain likes health savings accounts, health reimbursement arrangements, and other consumer driven health insurance options.
McCain’s plan decouples the tax break for health insurance from the workplace. And the tax credit would make health insurance more affordable for millions of mostly lower-income uninsured Americans by defraying most of the cost of coverage. Most families would likely be better off than under the system, but some would be worse off because their unlimited tax break would decline.

However, prospects for such a sweeping change are low, which may force McCain to support a more limited tax break. By relaxing regulations and giving people more options, McCain expects competition to drive prices down and drive quality up just as it does in other sectors of the economy.

McCain has long supported association health plans, which would allow associations and other organizations to offer self-insured health coverage. Whether the legislation passes or not, it highlights the fact that some states have imposed so many regulations that individual health insurance policies are very expensive and consumers have very few options. For more information, visit www.cahi.org.

Lower Medicare Part D Costs than Expected In 2009
As Medicare’s Part D prescription drug program enters its fourth year, beneficiary satisfaction rates remain high, program costs remain lower than originally expected, and Medicare prescription drug plan bids reflect nationwide drug price trends, announced the Centers for Medicare & Medicaid Services (CMS).

CMS estimates that the average monthly premium that beneficiaries will pay for standard Part D coverage in 2009 will be $28. This is about 37% lower than originally projected when the benefit was established in 2003.

The average expected premium for basic coverage in 2009 is about $3 higher than the actual average for 2008. The $3 premium increase is due to general trends in drug costs, the phase-out of a CMS demonstration project, and higher for catastrophic coverage based on prior experience. The vast majority of prescription drug plan enrollees could avoid any premium increase in 2009 by enrolling in a lower-cost stand-alone prescription drug plan in their region. Moreover, many beneficiaries have access to a Medicare Advantage (MA) plan with lower prescription drug premiums.

On average, in 2008, the Medicare Advantage-prescription drug premiums (prior to rebates) are about $9 per month lower than those for prescription drug plans. In 2009, they will average $11 lower. Many Medicare Advantage-prescription drug plans keep premiums low by applying a portion of their rebates to reduce their Part D premiums, in many cases to zero, as well as using care coordination and drug management techniques.

Americans Underestimate Retirement Risks          
More than 40% of the households that are at risk of being financially unprepared for retirement don’t know it, according to a report by the Center for Retirement Research (CRR) at Boston College. Sixty-one percent today’s workers will be at risk for not being financially prepared to retire compared to 44% a year ago. The study demonstrates how the surging cost of healthcare will affect retirement savings. A typical couple retiring in 2010 would need about $200,000 in savings to cover their out-of-pocket healthcare costs over their remaining lifetime and this amount is expected to grow rapidly over time.

Lower income households are more likely to fall into the "too worried" group, perhaps because these households are not aware that they receive relatively high replacement rates from Social Security due to the program’s progressive benefit structure.

Those in poor health are more likely than those in good health to fall into the “not worried enough group,” perhaps because they are less likely to have the energy to focus on financial issues. Younger people are also less likely to perceive potential risk. For more information, visit (http://crr.bc.edu/briefs_5.html).

EMPLOYEE BENEFITS
Voluntary Sales Higher Than Expected
A study by Eastbridge Consulting reveals that 42% of respondents say their company’s voluntary sales have been higher than expected. The Voluntary Industry Confidence Index study includes responses from carriers, brokers, and vendors. This result is significantly higher than the 34% of companies that were ahead last year at this time and the 31% who ended 2007 ahead of plan. Six percent of companies said their results are much higher than expected and another 36% said theirs were a little higher. The following reasons were cited most frequently for better than expected results:

• More new cases than expected
• Higher number of producing brokers/reps
• New product introductions

Critical Illness Tops Growth Products
Once again, carriers say that the critical illness product is likely to be one of their company’s (and the industry’s) top three growth products over the next few years, according to a study by Eastbridge Consulting Group. Gil Lowerre, president of Eastbridge said, “It’s very interesting that, every year since…2002, critical illness has made the list of expected growth products. Yet, sales over the past few years have been somewhat slow. In fact, in 2007, critical illness sales actually decreased about 12% compared to 2006.”

“Carriers seem to have a love-hate relationship with critical illness products. On one hand, they continue to select the product as a growth product. But on the other hand, they often name it as the product that has not grown as expected. Almost 20% of the carriers surveyed this year named the product as one that has not grown as they expected,” said Bonnie Brazzell, vice president of Eastbridge.

In addition to making the list of top growth products, critical illness was also one of the most frequently mentioned products that carriers expect to introduce in the next two years. In fact, 35% of carriers said they are likely to introduce a new critical illness product in the next two years.

Carriers also named term life and short-term disability as products likely to lead their own company’s growth. But when asked what products they believe will lead the industry’s growth, carriers named limited benefit medical plans and supplemental medical plans in addition to critical illness. “Over the past few surveys, we have seen a trend for carriers to choose one or more of their core voluntary products (life or disability) as growth products for their company. But they believe that the industry…will be growing through some of the newer products like limited benefit plans,” notes Lowerre. For more information, visit www.eastbridge.com.

The Life Insurance Gender Gap
Working women are less likely than men to have adequate life insurance coverage, according to a MetLife study. Female employees who have life insurance have coverage that amounts to only two times their household income while male employees generally have three times their household income in coverage. This gender gap is surprising given 64% of working women versus 52% of working men are very concerned about their families’ financial futures in the event of their own premature death. The survey also includes the following results about working women:

• 46% have taken no steps to determine their life insurance needs.
• 56% of those who have life insurance coverage are not sure that the coverage is adequate or they don’t believe it is.

Graham Cox, vice president, MetLife Life Products Management suggests the following ways for employers to increase the value of their group life insurance programs:

• Personalize benefit information and communications. Information should address the need for determining an appropriate amount of coverage on employees and their spouses or domestic partners. Direct certain messages to female employees. Almost two-thirds of surveyed women say that receiving personalized benefit information with cost information would make it easier to make decisions about their workplace benefits.
• Offer opportunities to buy supplemental coverage through the workplace. More than half of working Americans get the majority of their financial and retirement products through the workplace – up from 46% a year ago. In fact, 52% of women cite the convenience of buying voluntary benefits through the workplace as an important advantage.
• Send out a message about life insurance needs upon notification of a life event.
• Host an off-cycle enrollment for life insurance. Health insurance can take center stage during annual enrollment periods so a separate, focused life insurance enrollment period can allow employees to focus solely on their life insurance needs. This could help maximize employees’ participation rates and appreciation of their life insurance benefits.
• Providing value added features, such as will preparation and estate resolution services, could increase the value of the life insurance plan beyond a death benefit. Features are available pre-need for employees and upon-need for beneficiaries and executors.

For more information, visit www.metlife.com.

Pensions Can Beat Individual Accounts
A defined benefit pension plan can deliver the same retirement income to employees for 46% less than the cost of an individual defined contribution account, according to a study by the National Institute on Retirement Security. Defined benefit pension plans can do the following:

• Avoid the problem of over-saving by pooling the longevity risks of large numbers of people resulting in a 15% cost savings.
• Perpetually maintain an optimally balanced investment portfolio (rather than the typical individual strategy of down shifting over time to a lower risk/return asset allocation) resulting in a 5% cost savings.
• Achieve higher investment returns compared to individual investors because of professional asset management and lower fees – resulting in a 26% cost savings.

In one example provided in the report, the defined benefit plan needs to have accumulated approximately $355,000 for each participant by the time they turn 62, while the defined contribution plans must accumulate almost $550,000 per participant. To get the full report, visit www.nirsonline.org.