November 2013 California Broker | California Broker Magazine

Dental–Oral Health as Part of the Overall Health Equation
by Brenda Schmidt, MS, MBA and Dr. James Bramson • There’s a lot of talk about dental-medical integration, but what exactly does it mean and why should you pay attention?
Why Stand-Alone Dental Coverage Is Still the Best Choice
by Michael Scheetz • Producers should evaluate the carrier choices carefully, considering plan designs, PPO networks, customer service, and the emphasis on wellness education.
Affordable Dental Care in the ACA World
by Mark Roberts • Ever get punched in the mouth or lose some teeth due to an accident? Do you remember losing your baby teeth as you waited to get your permanent smile? That’s how the dental community feels based on the current activity due to the Affordable Care Act.
Wellness–Seven Things You Didn’t Know About the ACA
Dr. Ann D. Clark • Don’t be afraid of the ACA. With the right programs in place, the federal regulations could even boost gainful productivity in your workplace. Take advantage of it and be prepared for the new year.
The Framework for a Successful Wellness Plan
by Maria Mazursky • For workplace wellness initiatives to be truly effective, they need to have a framework that’s tailored to employees’ needs along with proper execution and a plan for evaluation.
Voluntary Benefits Jackpot–It’s a whole new game after the Affordable Care Act
Addressing the Growing Gap in Healthcare Coverage
by Eddie Murphy • Supplemental health products such as critical illness, cancer, and accident insurance are high on their list in the environment of the changing landscape of employer-provided benefits.
Benefit Brokers Leading Healthcare Innovation?
by Jason Szczuka, Esq. • How brokers are improving (and profiting from) healthcare’s new consumer tools & services.
Educate Your Clients On Voluntary Benefits
by Ron Fields • Are you surprised by how many of your clients barely know how health care reform will affect them? Don’t be; if recent surveys are any indication, they don’t even know their own employees all that well.
Healthcare–The Free Rider Penalty Right Now? Can’t It Wait?
by Toney Chimienti • If your group clients haven’t started their compliance planning yet, you probably need to quickly catch them up!
California Broker HMO Survey – Part II
by Leila Morris • Each year California Broker surveys health maintenance organizations in the state with direct questions about their plans.
LTC–Addressing the Key Objections of LTC Insurance
by Colleen Goldhammer • The overall health of the LTC industry has created a tough environment for producers trying to communicate to their clients the benefits and the need for long-term care insurance.
Have Your Clients Thought About Planning for LTC?
by Gene Tapper, MS, LNHA • Long-term care insurance can be a critical part of your client’s retirement plan — protecting their assets and income.
Life Settlements–Fractional Life Settlement Shares – An Opportunity
by Ken Morris • More accurate life expectancy calculations, more transparency in life settlement acquisitions, and more state and government regulation are expected to drive growth in the industry.
Life Settlements Enter Mainstream
by Stephen Terrell • Many observers prognosticated that the industry’s days were numbered. Fast forward to 2013, and nothing could be further from the truth.
Self Funding–How the ACA is Creating Opportunities
by David Zanze • Now is the time to take a moment to consider the abundance of opportunities that the new health care law has created for brokers
Which ACA Rules Apply To Self-Funded Plans
by Mark Reynolds, RHU • With all of the uncertainty surrounding the ACA, one area of clarity is the advantage of ERISA-based, self-funded plans (e-based plans).

Dental-Medical Integration: Oral Health as Part of the Overall Health Equation Oral Health as Part of the Overall Health Equation

by Brenda Schmidt, MS, MBA and Dr. James Bramson

There’s a lot of talk about dental-medical integration, but what exactly does it mean and why should you pay attention? Dental-medical integration means more than simply working together or having better coordination of care among dentists and doctors. It means more than just offering employees dental and medical benefits or offering a wellness program that only focuses on quitting smoking or losing weight. Dental-medical integration means that oral health is acknowledged as part of the overall health equation.

Or as we like to say, “The mouth is the missing piece in total body wellness.”

Today, employee wellness is a key to managing future health care costs. But when it comes to wellness programs in the workplace, no one typically talks about dental — specifically the role good oral health can play in improving overall health. This is surprising when you consider all of the research that connects a healthier mouth to a healthier body. In fact, a recent study by United Concordia Dental reveals that significant health care savings are possible when people with chronic conditions (for example, heart disease/stroke, diabetes and arthritis) and pregnant women, receive treatment and ongoing maintenance for gum disease.

Seventy-five percent of health care spending is on people with chronic conditions, such as diabetes, heart disease and stroke, according to a 2009 report by the Centers for Disease Control and Prevention. That’s why bringing medical and dental together is crucial to help ensure our nation’s overall wellness, enhance the quality of care, and reduce or control costs — known in the health care industry as the “Triple Aim.” Created in 2007 by the Institute of Healthcare Improvement (IHI), Triple Aim provides the dental and medical industries with a shared understanding of how new health systems can contribute to the overall wellness.

The integration of dental and medical care clearly provides a unique opportunity to prevent, treat, and manage chronic conditions. It improves communication and coordination among the five parties that are most crucial to providing preventive and ongoing care: patients, doctors, dentists, wellness companies, and benefit specialists.

Integration also opens the door to innovative approaches to health care — approaches that get to the heart of Triple Aim.

Today it’s not enough to understand the connection between oral and overall health. It is becoming increasingly important for the health care and dental industries to collaborate on solutions that help everyone while targeting those who need more attention and care. Simply put, we need to work together to provide the interventions and coaching that are needed to change behavior and improve health, thereby enhancing overall wellness.

A big challenge facing all of us today is helping people understand that getting regular dental care improves overall health. Now more than ever, we can increase public awareness of the role oral health plays in overall wellness. While there is a consensus that there is a strong connection between periodontal (gum) disease and chronic conditions, many people still don’t realize that oral health is tied to overall wellness. A 2012 online survey by the American Dental Association (ADA) reveals major gaps in consumer knowledge about oral health and hygiene, with the survey’s average correct score at 60%.

It’s important for employers and employees to understand why oral health matters. American workers miss 450 million days of work a year due to chronic conditions, according to the 2011 Gallup-Healthways Well-Being Index. That’s equal to $153 billion in lost worker productivity for today’s businesses.

Employers understand that they can lower costs and improve their workers’ health and productivity by offering comprehensive worksite wellness programs and benefits that emphasize prevention and deliver results.

As brokers, you play a unique role in the awareness process. You can stress the importance of worksite wellness programs that marry dental, medical, and vision coverage; you can help identify integrated health care solutions that are both cost-effective and results-oriented; and you can recommend best-in-class solutions to employers — solutions that yield higher worker productivity and profits, and lowered absenteeism and health care costs.

The connection between the mouth and the body underscores the need for an integrated approach to wellness. It also calls for dentists, doctors, wellness companies, benefit specialists, brokers, employers, and employees to have a shared commitment and understanding of wellness. Such an approach can encourage people to be partners in their journey to wellness, not just participants in their care. And that benefits everyone’s bottom line.

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Dr. James Bramson is chief dental officer at United Concordia, a wellness company that administers dental benefits for more than six million people nationwide. In this role, he directs the professional relations department, professional quality assurance activities, utilization review, the claims review process and clinical aspects of the product offerings, and communications. Dr. Bramson has 30 years of dental industry experience, including national experience as executive director of the American Dental Association (ADA) and secretary of the ADA Foundation.

Brenda Schmidt, MS, MBA, is president and CEO of Viridian Health Management, a company focused on improving the health of employees, families and communities through innovative health coach methodologies, integrated wellness programs and comprehensive care management technology solutions. Schmidt is a faculty associate at the Arizona State University School of Nutrition and Health

Promotion; an architect of numerous successful health and wellness programs; and is widely recognized as an authority on the development of best-in-class wellness programs that engage diverse populations.

Dental-Medical Integration: Oral Health as Part of the Overall Health Equation

by Brenda Schmidt, MS, MBA and Dr. James Bramson

Or as we like to say, “The mouth is the missing piece in total body wellness.”

Integration also opens the door to innovative approaches to health care — approaches that get to the heart of Triple Aim.

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Tips for Evaluating Dental Plans–Why Stand-Alone Dental Coverage Is the Best Choice

by Michael Scheetz
Americans love choices. We like to compare just about everything from clothing and shoe brands, restaurants, styles of houses and cars, to grocery stores, -hotels and vacation spots. We quickly develop favorites, based on the experiences and options we like the most.

The same is true of insurance benefits. In national surveys, employees repeatedly rank dental insurance among their top benefits. But there are many types of dental plans, and the coverage options can be confusing. Brokers can help employers and employees sort through the choices to find the plan with the right coverage.

Wellness and Preventive Dental. Parents often purchase dental coverage for their children, but not for themselves. Recent statistics from the American Dental Association demonstrate a startling decline in dental coverage over the past decade. The percentage of adults who go to the dentist has dropped from 41% in 2003 to 37% in 2010. As a result, emergency room visits for dental problems rose to 2 million in 2010 – more than twice the number recorded in 2000. This, of course, raises costs. Also, emergency rooms do not provide the preventive care and early detection that patents get though regular checkups.

Many employers recognize that workforce health affects job performance and productivity, and they invest considerable time and resources to encourage employees to pursue a wellness lifestyle. They provide incentives and ongoing education to help employees take care of their health. It is especially important for employers to remind employees how important it is to take good care of their oral health since it affects their overall health.

Value of Stand-Alone Dental. Ninety-eight percent of Americans with dental coverage have separate dental and medical policies. Stand-alone dental plans are typically offered by carriers that are experts in dental, which means the premium costs are accurate; benefits can be customized to employer needs; and customer service and claims processing systems are designed for dental. Some also have a nationwide, credentialed provider network.

Combining Medical with Dental. Many medical carriers offer discounts for combining dental benefits with the medical plan, but this option may not produce the expected results. A combined plan may seem cheaper (one premium), but it could lack important benefit components and anticipated cost savings. When evaluating combined plans, consider the following:

Promised Cost Savings. Some carriers will increase the price of the dental insurance to help offset the discount given for medical insurance. Others offer a discount on the medical-dental combination for only one year, and then implement a substantial rate increase at renewal to recoup losses.

Efficient Claims Processing. Processing dental claims can be challenging because of high plan utilization. Medical carriers that are inexperienced in offering dental may encounter significant problems and unforeseen expenses. They may subcontract the work to dental carriers in order to provide efficient claims processing services, which adds another layer of administrative costs.

Ask the carrier whether all the claims, such as medical, dental, life and disability, will go through the same claims processing system. Single-system claims processing may increase errors and lead to unhappy members. Dedicated dental carriers have processing systems that are designed to handle dental claims, resulting in more efficient and accurate payments.

Costs of Unbundling. If there is a problem with one of the plans, it may be necessary to switch to a different carrier for that benefit. Before signing the contract, find out the hidden costs of changing plans. Will the carrier continue the discounted price for the products retained? If not, finding new carriers and plans for all lines of coverage may be required.

Coverage Limitations. Dental plans may vary among insurance carriers. Carefully review the fine print in the proposal to understand coverage limitations.

Carrier Expertise. Evaluate the carriers’ expertise with dental claims and its flexibility in customizing plan designs with a range of options and pricing to meet specific needs.

Here are some questions to ask:

• Do their financial ratings show a good track record and future?

• Do they offer consistent pricing and logical renewal rates?

• Do they really know the dental business and focus on it?

• What type of customer service do they provide?

Compare Plan Designs. Dental coverage may appear similar, but each is designed differently. When comparing plans, it may be helpful to ask the following questions:

• Deductibles and maximums – If the plan has a deductible, when does it apply and what is the amount? Is there a maximum amount that can be charged per family? What is the annual benefit maximum available per year? If orthodontia is included, what lifetime benefit is available?

• Coinsurance and copayments – What is the coverage in-network and out-of-network? For PPO plans, know what percent the plan pays by procedure category, typically stated as preventive, basic or major.

• Frequency imitations — How often can each type of X-ray be taken? How many cleanings are permitted per year? How many years are allowed between crown replacements? For example, one carrier may approve replacement of crowns every five years while another may extend the limit to 10 years.

• Location of procedures — In which category do common procedures fall? Carriers can move procedures into different categories of coverage or insurance, such as X-rays, endodontics (root canals), periodontics (gum disease treatment), or oral surgery. It is crucial to know whether these procedures are classified as preventive, basic, or major since these classifications are likely to affect rates and out-of-pocket costs.

• Waiting periods and participation – Which procedures require a waiting period before employees can access benefits? Is the policy different for current employees and new hires? What participation percentage of eligible employees does the carrier require?

• Network access – If the plan design includes a dental network, are there enough contracted providers to serve employees? Producers should know how the carrier counts the network providers, including the difference between access points, providers and locations.

• Extra benefit services – Does the plan cover dental implants? What about composite fillings in molars? Are adults eligible for orthodontia coverage? Some plans also offer carryover maximums and dental coverage with vision, hearing or prescription benefits. Know what extra incentives are built into the plans that increase the value for employees.

Evaluate Dental Choices. Dental coverage has seen many changes over the past few decades, but the needs of Americans have not changed. Preventive dental care is essential for good oral and overall health.

Producers have an opportunity to help employers and employees identify the dental benefits that will meet their needs. Evaluate the carrier choices carefully, considering plan designs, PPO networks, customer service, and the emphasis on wellness education. Partnering with the right carrier goes a long way toward helping employers maintain a healthy and satisfied workforce.

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Michael Scheetz is vice president – Group Marketing for Ameritas, headquartered in Lincoln, Neb. Scheetz joined Ameritas in 2011 and has worked in the insurance industry for more than 15 years. Currently he serves on the education committee for the National Association of Dental Plans. For more information about Ameritas dental and vision plans, contact Scheetz at mscheetz@ameritas.com.

Dental Plans–Affordable Dental Care in the ACA World

by Mark Roberts

Ever get punched in the mouth or lose some teeth due to an accident? Do you remember losing your baby teeth as you waited to get your permanent smile? That’s how the dental community feels now based on the current activity due to the Affordable Care Act. They are anxious about what’s going to -happen starting in the next few months when the ACA kicks into high gear, and individuals and employers are forced to choose what dental plan they can buy and where.

Most health care providers acknowledge that oral health is a vital component of overall health. Even the Surgeon General and the National Institutes of Health have touted publicly that oral health is critical to good physical health. But according to Health Affairs online, when it comes to a major determinant of oral health — access to routine dental care — the Affordable Care Act (ACA) falls well short in all three of the triple aims: lowering costs, increasing access, and improving health outcomes, mainly when it comes to adults.

As a result, state governments now play an even more important role, as they have several critical policy levers at their disposal to pick up where the ACA left off. This is the main conclusion of research briefs from the American Dental Association. It discusses how the ACA may affect visits, expenditures, and benefits for dental care. It also looks at how Accountable Care Organizations will affect dental care delivery and financing, as well as a broader analysis of the changing patterns of dental benefits for adults and children. The ACA has important implications for oral health, for adults more in terms of what it did not do as opposed to what it did.

The past decade has seen a significant decline in dental care utilization among adults, particularly, those who qualify as poor. This has been driven, in large part, by a decline in private dental coverage as well as the fact that various state Medicaid programs are reducing adult dental benefits. The results have been troublesome. More and more adults are experiencing financial barriers to dental care. The rate of hospital ER visits for preventable dental conditions has increased among adults, driving up costs to the health care system to the tune of up to $2 billion a year. Urgent action is needed to reverse these trends and, unfortunately, the Affordable Care Act did not take the bold steps needed.

According to DrBicuspid.com, many Americans delay treatment for oral health issues due to financial concerns or a lack of access to care. Consequently, preventable issues often become complicated before treatment takes place. A study published by the Journal of Endodontics stated inadequate insurance is likely a factor, since access to care hinges on having dental insurance in the U.S., and as many as 25% of adults 65 and younger lack it, according to the Centers for Disease Control and Prevention’s National Center for Health Statistics. Meanwhile, the burden on Medicaid to pay for discharges related to dental emergencies has jumped 74%. Medicaid, in its current form, does not cover dental care for individuals older than 21.

The trends indicate that improvements must be made to the U.S. healthcare system, given the cost disparity between hospitalization for a dental emergency and preventive or routine dental treatment in a dental practice, the researchers noted. The findings of the study highlight the need to advocate to government agencies, business leaders, insurance companies, and the public on the importance of offering dental coverage as a way to improve access to dental care and reduce the number of hospitalizations, according to the study.

Over 90% of spending for dental care in the United States is financed through private insurance and out-of-pocket payments. According to the National Association of Dental Plans, 99% of dental benefit plans are sold as stand-alone policies, separate from medical plans. Despite the fact that the mouth is the gateway to the body and oral health is a key part of whole-body health, the ACA fails to address critical dental care access issues.

Moreover, particularly when it comes to adults, it has actually increased the divide between dental and medical care delivery and financing, which is at odds with one of the key tenets of the ACA — better coordination of care. Even for children, while an expansion in dental benefits and reduction in the uninsured is expected, the Affordable Care Act does not address many critical issues. These include improving the administrative process in Medicaid programs and adjusting reimbursement levels to providers so they are closer to market rates, according to Health Affairs.

Approximately 8.7 million children could gain extensive dental coverage through the ACA by 2018. For children, the expansion will be almost evenly split among Medicaid (3.2 million), health insurance exchanges or marketplaces (3 million), and employer sponsored insurance (2.5 million). About 17.7 million adults could gain some sort of dental coverage through the ACA. However, given that many states have only limited or emergency dental benefits through Medicaid, only 4.5 million adults will gain extensive dental benefits through Medicaid. About 800,000 adults will gain dental benefits through the health insurance exchanges.

The ACA is expected to add 11 million pediatric private dental visits — due to the expansion of dental benefits through the exchanges and employer-sponsored insurance, according to the American Dental Association. The ACA also will generate 1.7 million adult private dental visits through expansion of dental benefits in the health insurance exchanges. The ACA is expected to increase U.S. dental spending by an estimated $4 billion, which is less than 4% of current national dental expenditures. The largest effect will be seen in the Medicaid population, generating $2.4 billion in Medicaid dental spending. This represents a 28% increase over 2010 Medicaid dental spending levels with adults accounting for roughly two-thirds of the increase. An additional $1.6 billion in expenditures is expected by adults and children gaining private dental benefits through exchanges and employer sponsored coverage.

States that already have extensive dental benefits in Medicaid will probably continue to have extensive dental benefits through Medicaid through 2018. An analysis of state-level policies by the American Dental Assn. (ADA) finds that 11 states (AK, CT, IA, NM, NY, NC, ND, OH, OR, RI and WI) have extensive Medicaid adult dental benefits. The ACA does not provide strong incentives for states to change their adult dental benefits in Medicaid from current levels. States have incentives to lock in existing policy. For states that already provide some level of adult dental benefits, the federal government will fully fund the expenditure associated for the expansion population for the first three years. Even though adult dental benefits are not mandated by the ACA, if states already provide the benefit to adults in Medicaid, the additional fiscal burden of maintaining the benefit is likely to be minimal. However, states that don’t already provide adult dental benefits in Medicaid will have very weak financial incentives to add them. Because states have scaled back adult dental benefits over the last decade, it is unlikely that the increase in Medicaid enrollment has resulted in a significant increase in dental benefits.

According to CMS, California has one of the nation’s lowest rates of kids who receive dental care. Experts say that trend could stem from a lack of awareness among parents, as well as the state’s low reimbursement rates for pediatric dentists who treat beneficiaries of Medi-Cal, California’s Medicaid program.

The California Dental Association’s advocacy on these issues remains strong. Earlier this year, CDA executive director Peter DuBois met with Peter Lee, the executive director of the Health Benefit Exchange Board, to ensure that the exchange staff at the highest level is aware of critical issues regarding access to dental care as California moves toward implementation of health care reform. Issues discussed included the unique nature of dental benefits compared to health insurance and CDA’s recommendations for policy changes for the Exchange Board to make to ensure that there is a fair and open marketplace for consumers to make well-informed purchases of dental benefits and to ensure that families are able to retain their dentist when they purchase coverage so that continuity of care can be maintained.

While details on the ACA’s implementation continue to emerge and develop, the CDA is maintaining strong advocacy on these critical and complex issues. The CDA met recently with key members of the California Health Benefit Exchange Board, and is in frequent consultation with exchange staff and legislative staff. These efforts include providing testimony at exchange board meetings, submitting extensive written comments regarding the solicitation for bids from plans that want to provide the supplemental adult benefits through the exchange, and providing comments on emergency regulations that govern a range of issues affecting dental benefits in the exchange.

In addition, different rules apply to these benefits depending on whether they are sold to big companies, small companies (with 50 employees or fewer), or individuals; whether they are sold inside or outside the exchanges that the act sets up; and whether the dental benefits are sold separately (as most are now) or bundled into medical insurance plans, according to Medscape Medical News.

The essential benefits requirement never applied to large employers. Now the HHS has ruled that individuals and small employers who are shopping inside the exchanges don’t have to buy pediatric dental benefits if dental benefits are not bundled into medical insurance plans. Only small companies and individuals who are shopping outside the exchanges will be required to get the benefits.

The ruling surprised many oral health advocates. Nearly all the advocacy groups are united in opposing another ruling. The law offers subsidies for healthcare coverage in the form of a tax credit for families for up to 400% of the federal poverty level. How much subsidy a family gets is largely determined by its ability to pay for the cost of a silver healthcare plan, one with a medium range of benefits. The IRS has ruled that it will not count any premiums paid for stand-alone dental plans as part of the cost of such a silver plan. At this time, the HHS has set a limit of $700 per child for out-of-pocket dental expenses. The NADP is pushing for a $1,000 limit, arguing that setting the limit at $700 will force insurers either to charge more for their policies or reduce their reimbursement for routine services.

The NADP and CDHP, along with the American Dental Association and many other groups, are united in calling for the IRS to include anything a family is paying for stand-alone dental plans when determining subsidies. In the meantime, as a result of these rulings, advocates are scaling back their estimates of how many new patients might get dental benefits. “The intention was to increase the number of people with coverage, but the system put in place won’t -necessarily do that,” said Evelyn Ireland, executive director of the NADP. The number of adults with coverage has been declining while the number of children with coverage has been increasing, mostly through Medicaid and the Children’s Health Insurance Program. The new law looks likely to accelerate that trend, according to Medscape Medical News.

So, the big questions are: who gets coverage and how much is it going to cost? At present, there are a lot of players in the mix — the ADA and state dental associations, exchanges both public and private, politicians and lobbyists, the healthcare companies and insurance carriers, state governments and the HHS, agents and brokers, employers and employees, HR managers, individuals and families, dentists and large dental practice management groups, and the list goes on.

At the end of the day, sticker shock for the ones who must choose what to do and where to go is going to happen soon. Amid all the confusion, we hope that the light at the end of the tunnel is a way out instead of an oncoming train. There are choices, but which one is the right one for you? Whether you go with dental insurance or a dental savings plan, the writing is on the wall — dental is going to be completely voluntary for anyone who wants it. Gone are the days of employer paid dental benefits.

But, does affordable dental care exist? Yes, it does, if you know where to look. Don’t wait until the last minute to find the best plan for you or your company. Those who go to market with the best product have the best opportunity to win the day in the dental care world. Those who do their shopping homework are going to end up with the best coverage. Stay tuned for Part II-Solutions for an Affordable Smile.

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Mark Roberts’ professional sales background includes 30 years of sales and marketing in the tax, insurance and investment markets. Mark is a licensed life, health and accident insurance agent in all 50 states and DC, for insurance products and discount health plans. He serves as Manager of National Accounts at Careington International Corporation (www.careington.com). Additionally, Mark works with clients needing insured products (www.careingtonbenefitsolutions.com) in the US and discount dental and optical schemes in the UK (www.healthydiscounts.co.uk). Mark has been writing a health care blog for the past five years, (www.yourbesthealthcare.blogspot.com), which is a topical weblog about various health care issues. He also regularly contributes articles to magazines for both medical and dental topics both in the US and the UK. You can reach Mark at markr@careington.com.

Wellness: Seven Things You Didn’t Know About the ACA

by Dr. Ann D. Clark

There is a lot of speculation about what the Affordable Care Act (ACA) means for employee assistance and wellness programs. Now, with minimum essential coverage required by employers, the question on everyone’s mind is, “Can EAPs be considered minimum essential coverage?” While that question is still up for debate, it is clear that EAPs and corporate wellness programs can help lessen healthcare costs. Many of the ACA clauses go into effect in 2014, so it’s time to be prepared. Here are the facts:

1. Mental disabilities are rising. Depression is the number one cause of disability in the United States, and over 58 million Americans suffer from a mental disorder. ACA now requires employers to have equal coverage for both mental and physical health. With mental health parity, that will mean two things: Employees can get the care they need, and their medical claims will start to go up. EAPs can be a huge preventive factor in mitigating costs, both direct and indirect due to productivity losses associated with depression and other conditions.

2. Free Wellness. If you aren’t taking advantage of this offering, you’re missing out. ACA rewards corporations that enable their workforces to get moving with credits and cash (as high as 7% of health premiums). Compliant programs know how to put credits to good use, too, with incentives that work.

3. Employers with more than 50 employees must provide health insurance by 2015. That’s right; the mandate has been extended another year, so forget the scrambling and start preparing now to provide health insurance under the “minimum essential coverage” clause. For some companies with mostly part-time employees, that could be as simple as investing in a hands-on EAP. After all, EAPs already have phone and face-to-face mental health assessment as well as referrals to local low-cost medical centers. And for those with larger benefit goals, an effective EAP can be a great complement to both physical and mental health care providers. That said, you know what’s coming next.

4. Employers can save as much as $2 million per year using an EAP and/or wellness program. EAPs have a proven ROI that saves on training, assessment, productivity costs and more. Without a mental health program, corporations are looking at up to a 30% increase in outpatient costs. A robust employee assistance program mitigates those costs.

5. One-fifth of Americans take drugs for mental illness. That means if you have 100 employees, 20 of them are spending health insurance claims on mental health issues. Though the mental health parity now covers these individuals equally, there are many cost-effective solutions through EAPs to healthcare problems without having to see a doctor or take a prescription. Skilled clinical assessment, community resources such as 12-step programs, and ongoing support and follow-up are often more effective than prescriptions alone, and can help prevent prescription dependence in some cases.

6. Intervention isn’t just for mental health. Prevention is hugely important in physical well being as well. In the past decade, employer premiums have risen by 133%, largely due to the 86% of full-time employees living with a preventable health condition. Measures like early screening, ongoing education, and personalized wellness coaching directly reduce costs and boost employee investment in their own health. EAPs and wellness programs will prevent employers from paying these high premiums.

7. Fifty percent coverage on health premiums towards rewarding employees for not smoking. With over 19% of American Adults classified as smokers, odds are companies have at least one smoker on the clock – and that’s a lot of money in preventable prescriptions and hospital costs associated with stroke, heart disease, lung disease, and cancer. EAPs can offer clinical help, qualified onsite trainers, and expert health coaches to help employees quit the habit.

While federal regulations on ACA haven’t yet been confirmed, there’s one thing that I’m sure of: specialty benefits like EAPs and wellness programs are going to play a huge part in cutting rising costs. Is your workplace healthcare plan complemented by these benefits? If not, it’s time to start looking into how specialty benefits can help you out with ACA regulation. With a behavioral health plan, corporations are looking at a savings of up to 30% overall, not to mention the gains in morale with healthier, happier employees. And don’t forget the medical benefits; employers who take advantage of free wellness programs are helping their employees tackle preventable diseases and ultimately avoid long-term costs.

The bottom line? Don’t be afraid of the ACA. With the right programs in place, the federal regulations could even boost gainful productivity in your workplace. Take advantage of it and be prepared for the new year.

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Dr. Ann D. Clark is CEO and Founder of ACI Specialty Benefits, a Top Ten EAP and leading provider of concierge, wellness, student assistance and work/life services. A best-selling author, Dr. Clark is one of the original Certified Employee Assistance Professionals (CEAP) and a licensed Marriage and Family Therapist. She can be contacted at aclark@acispecialtybenefits.com.

Wellness–The Framework for a Successful Wellness Plan

by Maria Mazursky

Too many companies dive in with sweeping workplace wellness programs that are doomed because there is a lack of planning; program communications are not engaging; employees are not involved; and there is no long-term vision.

For workplace wellness initiatives to be truly effective, they need to have a framework that’s tailored to employees’ needs along with proper execution and a plan for evaluation. More important than just implementing a wellness plan is seeing it through.

It is also crucial for a wellness initiative to match a company’s culture, personnel, and long-term goals. Successful programs offer creative solutions to employees’ needs. The most effective corporate wellness programs offer something for everyone — from the business traveler looking to find a gym in a far-flung location, to the telecommuter looking for a nearby kick-boxing class, to the committed dieter looking for a nutritionist in their area, to the regular employee looking to increase their fitness level.

A common trend with many successful workplace wellness programs is to partner with an outside company. Outside wellness vendors and consultants allow small and medium-sized employers to take advantage of new resources and connections without having to enhance their own wellness infrastructure.

Measuring Success

Employers should have a system of metrics in place before starting a wellness program. Without a way to measure a program’s successes and failures, employers are relegated to trial and error, which breeds inefficiency.

The following are some common metrics that should be used when setting up a corporate wellness program:

• Participation.

• Engagement and sustainability – the number of employees who continue to engage in behaviors that reduce their health risks even without guidance from a program.

A trickier metric is how satisfied employees are with the wellness plan. It is important to remember that you are dealing with employees who have their own wants, needs, and concerns throughout every step of the process. If you rush into a program before laying the groundwork with employees and engaging the management, you risk having employees go elsewhere for their health and wellness needs — or worse, neglecting those needs entirely.

There is also the challenge of measuring the wellness program’s return-on-investment (ROI) in terms of reduced health benefit costs, increased productivity, and a more positive company culture. Health benefit costs can be calculated by analyzing claims, productivity, and voluntary turnover.

And let’s not forget creative communications and branding as crucial parts of any workplace wellness initiative. Because you are dealing with such a multi-faceted issue as employee wellness, it is crucial to addresses employees who have diverse health and wellness backgrounds. The key may be to develop a multi-dimensional, multimedia approach. An open wellness plan needs to be branded as such; otherwise employees will feel uncomfortable with total participation.

And how about positive reinforcement? When it comes to health and wellness, employees need to take the initiative and take responsibility. Realistic, workable incentives from the employer will go a long way towards helping make that happen.

The Need for Wellness Programs

Here in the U.S., only 20% of adults meet the CDC’s guidelines for physical activity. The number of clinically obese adults has more than doubled since 1980, now extending to a third of the population, according to recent estimates by the World Health Organization. What’s more, the Brookings

Institute estimates that close to 21% of medical spending in our country is related to obesity.

The average annual loss in productivity per worker due to sick days is $28,800, according to the Gallup Management Journal. Obese Americans spend about 36% more on healthcare costs and 77% more on medications, according to the Brookings Institute.

A recent study conducted by the Harvard Wellness Program found that medical costs fall by $3.27 for every dollar spent on workplace wellness programs and that absenteeism costs fall by $2.73 for every dollar spent.

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Maria Mazursky is CEO of TourDeFIT.com. TourDeFIT.com creates and manages corporate wellness programs and provides employers with surveys, testing and assessments, unique programming, engaging communications, online enrollment, tracking and reporting, as well as special corporate rates for thousands of fitness and wellness facilities and providers.

Voluntary Benefits Jackpot: It’s a whole new game after the Affordable Care Act

Health reform has ushered in the golden age of voluntary benefits. Brokers are trying to diversify revenue sources; employers are trying to control benefit costs; and employees are trying to cover out-of-pocket health expenses. That’s where voluntary benefits come in. Fifty-eight percent of employers surveyed by MetLife, called voluntary benefits a significant benefit strategy in 2012 up from 32% in 2010. Industry experts told us that the fastest growing voluntary products are critical illness and accident insurance. When coupled with high deductible health plans, these voluntary benefits offer affordable alternatives to what could be significant risk.

These are just a few observations from our panel of experts. They offered a wellspring of insights in response to all of our questions.

Addressing the Growing Gap in Healthcare Coverage

by Eddie Murphy

Today’s healthcare options can be expensive for everyone — from families looking to satisfy their insurance needs to businesses seeking to attract and keep talented workers. More and more companies are reducing employer-provided benefits — leading to a growing concern about the increasing gaps in coverage and potential financial obligations for employees.

The average cost of a family health policy climbed 4% in 2013 to $16,351. Even as the Affordable Care Act (ACA) is being implemented, many experts continue to speculate that employers will pass along the additional medical costs to their workforce, offsetting the increasing cost of providing a comprehensive healthcare benefit package.

The shift of responsibility has created a unique opportunity for the voluntary benefit industry to help fill the gap where employer-sponsored benefits fall short. The voluntary benefit industry is experiencing a rising demand for supplemental health benefits as well as voluntary life and accident insurance. Employees are looking to protect themselves and their families from any potential risk, especially during these uncertain economic times while companies are looking to include voluntary benefits as a way to enhance their compensation packages.

With a renewed focus on the voluntary benefit industry, there is a need to grow and adapt to the changing environment, packaging benefits in a way that is cost-effective and helps provide employees with a broader level of security. Most importantly, improvements in technology must be developed to make the enrollment process easier.

Building Benefit Packages for Greater Assurance

The impact of the rising cost of healthcare coverage on employees goes beyond medical care, as employers limit pay increases and other crucial elements of a competitive compensation package to avoid any additional expenses.

Even though consumers are now able to enroll in Affordable Care Act, there is still a high level of uncertainty and changing opinions on it will affect employers. Ninety-eight percent of employers will retain their active medical plans for 2014 and 2015, according to a recent survey by Towers Watson. However, in the same study, 74% of companies said that, as they evaluate private exchanges for active full-time employees, they will want evidence that private options deliver greater value than the current self-managed model.

In addition to supplemental health, accident, and disability insurance, companies are looking to provide employees access to risk and financial protection, including coverage for identify theft. Producers and agents should encourage their clients to package or bundle voluntary benefits, tailoring offerings that align closely with a company’s needs while providing a stronger platform of security for their employees.

Employees now have the option to take control of their financial future by customizing their insurance portfolio with plans designed to fill gaps. One trend that we are seeing is employer migration towards providing comprehensive medical plans that include higher-deductible and co-insurance plan designs. The movement is intended to reduce increased insurance premiums, but it comes at a cost to employees in the form of increased out-of-pocket expenses and financial exposure. The opportunity is there for employers to offer a stable of disability, accident, and critical illness benefits bundled with supplemental medical plans.

Improving Ease of Enrollment through Technology

Employees now have more coverage options and offerings to consider. It’s the job of insurance providers to deliver products in a straightforward and clear manner. Providers also must understand the need to become multi-dimensional in our enrollment options for first-time buyers.

Face-to-face enrollment has been the backbone of the industry. Although most hope that the personal touch never goes away, providers must align themselves with the varying preferences of our potential clients. The right solution seems to lie within a mix of in-person interactions, call centers, online enrollment, and self-service support.

The increasing role of technology in enrollment is streamlining and simplifying the process for employers, employees, and providers. Enrollment specialists now have the ability to use unique software that syncs inputted data to headquarters at the end of the workday while the employee can go online and research which products are right for them.

This newfound freedom reminds us that not all providers communicate clearly about what the end user is getting. The research process can be overwhelming for employees. So it’s our job, as providers, to offer employers the necessary decision-making support. This includes a commitment to producing clearer communication materials and keeping the end user in mind throughout the development process.

An Industry Shift

Producers are searching for options to better accommodate employers and employees in the next three to five years given the changing landscape of employer-provided benefits. With that on everyone’s mind, supplemental health products, such as critical illness, cancer, and accident insurance, are high on their list to do just that.

The supplemental health products space is in the middle of a reemergence. While the national media has been mainly focused on 2014 and health care reform, smaller employers across the country are dealing with these critical healthcare coverage issues since 2012.

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Eddie Murphy serves as regional vice president, Health Distribution, for the marketing unit of Transamerica Life Insurance Company, a leading employee benefit provider specializing in life and supplemental health benefits.

Benefit Brokers Leading Healthcare Innovation?

by Jason Szczuka, Esq.

Brokers are improving and profiting from healthcare’s new consumer tools and services.

“How do I offer employees a more cost-effective dental benefit?”

“What can we do to increase in-network utilization and lower premiums?”

“When will healthcare patients get the tools and information to be better healthcare consumers?”

If you’re reading this article, then you’ve likely been asked these questions from more than one of your clients in the past few years. The good news is that technology companies from Santa Monica to Silicon Valley are developing tools and services that revolutioinize the way employees make benefit decisions.

Starting in the more retail-oriented areas of healthcare, such as dental and vision, these innovations are designed to help employers better contain their healthcare costs while increasing the quality of care their employees receive.

The smartest of these innovators are improving their products by incorporating brokers’ insights into employer needs, employee preferences, to address shortcomings of today’s benefit market.

In turn, participating brokers can position themselves to potential clients as being on the cutting-edge of controlling premium costs. They can extend their reach to existing clients by providing new products to employees who are not included in traditional benefit offerings (part-timers, retirees, etc.).

New Tools & Services = Happier Clients

Thanks to the input of benefit brokers, new products are available to employers (some even for free) that deliver solutions to their employees’ three most pressing concerns:

1. Lower Out-of–Pocket & Claims Costs

Employees who need a healthcare procedure that’s not covered by insurance can now freely access the same – and often better – pre-negotiated discounts at local doctors than what large insurance companies get (ranging from 30% to 50% off).

Those who do have insurance can use these new transparency tools to compare out-of-pocket costs at different doctors to lower their co-pays and help their employer reduce premiums over time.

2. Higher Quality of Care

A detailed provider profile helps the employee determine which doctors are best for their needs. For instance, many of these new tools provide the education and credentialing background on each provider profile, as well as verified patient reviews, office technologies and amenities, introductory videos, and more.

A doctor who is integrated into the benefit plan’s platform knows that, by providing great care, they’ll be regarded more highly, which can attract even more patients. Because of this, healthcare providers have direct incentives to deliver the best patient experience to all employees on the platform.

3. Greater Convenience 24/7

These new products help employees manage their family’s care and understand how their benefit plans work. For instance, many new benefit services offer online appointment scheduling and management tools to track all healthcare services in one place.

These online platforms also make it easier to combine the cost and quality transparency improvement. This benefit guarantees that the employees can get the best care at the best price.

Happier Clients = Increased Commissions

In addition to helping their -clients contain premium costs, participating brokers are also benefiting as they generate more commissions.

One of the reasons that these products are so well received is that their business models are very friendly to the employer while generating revenues for brokers. The most popular of these models include:

Free to the Employer & Employee

These products give all employees, both insured and uninsured, free access to their cost savings, provider quality metrics, and convenience tools. Instead they pay brokers from the revenue generated from services they provide the doctors whenever an employee uses the platform. This approach ensures that many more patients use the platform than if someone had to pre-pay for it. In the long run it generates more commissions for the participating broker.

Synched with Employees HSAs & FSAs

These models, most often charging a small fee on a per-employee basis, are imbedded into the employees’ consumer-driven accounts. Employees make more efficient use of the pre-tax income they have set aside for purchasing healthcare and employers can move to plan designs with fewer claims and administration burdens.

If you are one of these participating brokers, congratulations on getting a head start on your peers. If you want to, start by connecting with the companies offering products that are best able to fill your clients’ benefit holes; they’ll want to quickly include these new products once you’ve added them to your portfolio. You can very easily deliver solutions that enhance their dental benefit strategies, medical network utilization, and prescription formularies.

Your current and future clients will reward you for helping to lead the type of healthcare innovation that benefits everyone.

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Jason Szczuka, Esq. is the general manager at myBrighter, the simple and free way to enhance group dental benefits. myBrighter’s innovative platform can be used by all employees, both insured and uninsured, to reduce their dental bills 30% to 50%, find the best local dentists, and manage all their dental appointment needs online. myBrighter is 100% free for both employers and employees, and pays brokers commission whenever their clients employees use the platform.

Ignorance Isn’t Bliss… Educate Your Clients On the Importance Of Voluntary Benefits

(Before They Feel The Crunch Of Health Reform!)

by Ron Fields

Are you surprised by how many of your clients barely know how health care reform will affect them? Don’t be; if recent surveys are any indication, they don’t even know their own employees all that well.

That’s a harsh judgment, but an accurate one. A pair of Aflac studies conducted in the past year uncovered a shocking disconnect between what employees expect from their companies and what those employers are actually prepared to provide. For example:

Only 13% of employers said educating employees about how health care reform will affect their benefits is a priority, but three-quarters of employees expect their companies to provide this information.

Forty-eight percent say they’re likely to send workers to state insurance exchanges, but three in five employees expect their employers to continue offering comprehensive benefit options.

Seven in 10 companies believe their employees’ health care costs will rise, but half of all workers say $25 is the maximum monthly increase their budgets can handle.

This disconnect will eventually become too serious to ignore as the government continues implementing the Affordable Care Act (ACA). And someone’s going to feel the pinch, whether it’s employees who are -suddenly scrambling to cover health costs or companies that are finding their employees fleeing for better options. The latter is already happening: According to CareerBuilder, 32% of employers have lost top performers to other organizations, and nearly 40% expect this trend to continue. When you add the fact that nearly three in five employees would take slightly lower pay in exchange for better benefits, companies have a problem.

As a broker, though, you can keep your clients and their workers from suffering these dire consequences. You can demonstrate your value to clients more clearly than ever before by using your expertise to get businesses and employees on the same page and showing them how voluntary insurance policies can help ease the transition into the new health care environment.

Be the Resource Your Clients Need

Three and a half years after President Obama signed the ACA into law, businesses across the country still aren’t sure of their responsibilities. Less than 10% of companies describe themselves as “very prepared” to implement the mandated changes. And they’re counting on brokers to guide them.

Some companies will have to cut benefits, raise premiums, or send their employees to public or private health exchanges. But what’s better for their bottom lines could come at a steep cost in terms of workforce morale and satisfaction. According to Aflac’s 2013 Open Enrollment Survey, 55% of employees say they’re at least somewhat likely to look for other jobs if their employers stop offering comprehensive benefits or send them to exchanges.

If your clients want to reduce their costs for major medical coverage – possibly by switching to a higher-premium health plan – offering voluntary benefits can help their employees supplement their benefit package. Alternatively, if a client is resigned to sending employees to a public exchange, offering voluntary policies can soften the blow by providing a safety net for what the exchange doesn’t cover.

The health reform regulations can be a lot to sift through, but investing time can pay off in a big way for brokers. The more you know about the health care reform provisions, the better you can educate your clients about the right solutions for their specific situations. And the more trust you earn from them now, the more business you stand to earn in the future.

Employees Are Vulnerable; You Can Protect Them

The chances are good that your clients’ employees weren’t that knowledgeable about their benefits situations even before health care reform passed into law. Aflac’s research found that three-quarters of employees say they understand what their insurance covers just sometimes, rarely, or never. Nine out of 10 admitted to choosing the same benefits every year, even though 60% of that group believe they waste as much as $750 per year on enrollment mistakes such as unnecessary coverage amounts, putting too much or too little into flex accounts – and passing on voluntary options

Sadly, it gets even worse for employees. Half of them expect their health insurance to cover fewer services once reform goes into effect, but less than a quarter have increased their savings accordingly. Forty-six percent say they have less than $1,000 set aside for out-of-pocket medical expenses, and 36% say they’d have to borrow.

Workers know they’re facing a dire situation; they just don’t know what to do about it. Voluntary benefits can help solve many of these problems at once. For employees who are fearful of wasting money on superfluous benefits, a comprehensive menu of voluntary offerings allows them to supplement the benefits available in their major medical plan to meet their needs without paying too much. For employees who are worried about rising out-of-pocket costs, a good supplemental plan can cover those costs and even offer additional funds if, for example, they need to hire home help during a prolonged recovery.

Employees may be left vulnerable depending on how their employers respond to health care reform. But even a modest investment in voluntary benefits can help keep prevent vulnerabilities from damaging their families’ long-term financial security.

Communication is Key So Lead By Example

If employers are in the dark about health care reform and what to do about it, their employees are almost certainly even less aware. So whatever solution you’re able to craft for your clients and their employees, it’s imperative to ensure that management and labor have matching expectations about what the company will provide.

A good broker keeps clients in the loop throughout the process of crafting a benefit package. Coach your clients to do the same for their employees and to make these six points their messaging priorities:

• Discuss whether the company plans to offer employer-sponsored major medical coverage or send employees to exchanges.

• Communicate whether purchasing coverage through an exchange could cause employees to miss out on employer contributions or federal tax breaks.

• Explain what level of coverage the company currently offers.

• Discuss the dollar value of what the company currently contributes toward benefits.

• Describe what voluntary/supplemental options are available.

• Communicate the full scope of the company’s benefits program, such as a “total rewards” summary.

The transition to health care reform is difficult for businesses and -consumers. However, by investing some time and brainpower into learning the laws and how they’ll affect your clients, you can become the trusted advisor your clients need. And by making voluntary benefits part of the solution, you can protect your clients and their workforce from the consequences of facing health care reform uninformed.

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Ronald Fields is vice president of Core Broker Sales for Aflac. He is responsible for developing and strengthening relationships with national and regional brokers, and accounts in the United States. To learn more, visit aflac.com/brokers, call 888-861-0251, or e-mail brokerrelations@aflac.com.

Health Insurance – Do Your Clients Really Have To Worry About The Free Rider Penalty Right Now? Can’t It Wait?

by Toney Chimienti

Unfortunately for many employers, it can’t wait. In fact, if your group clients haven’t started their compliance planning yet, you probably need to quickly catch them up!

Under Health Care Reform, large employers (with 50+ full-time equivalent employees) that do not offer health coverage to substantially all full-time employees and their dependent children, or offer coverage that is unaffordable or inadequate, and have at least one employee enroll in Exchange coverage and qualify for a federal premium tax credit or cost-sharing reduction, must pay a Free Rider penalty. A full-time employee is one who works 30 hours per week or 130 hours per month.

Originally effective January 1, 2014, the IRS has stated that it will not assess any Free Rider penalties in 2014 because of the delay in required employer reporting. Many employers believe mistakenly that, because of this delay, nothing needs to be done in 2013. However, the following are a few reasons why employers who delay may run into issues down the road:

1. Non-calendar year plans may not really get a full year delay.

The IRS announced it was not yet equipped to collect the reporting information that they need from employers to enforce the Free Rider penalty, which means they will not assess penalties in calendar year 2014. The first penalties will be assessed beginning January 1, 2015. For employers with calendar year plans, this delay provides a full year of relief in connection with the Free Rider penalty.

Non-calendar year plan sponsors, however, have a slightly different situation. Originally, non-calendar year plans were given a transition rule, which meant the Free Rider penalty did not take effect until the plan year beginning in 2014. That transition rule was not included in the delay, which means employers sponsoring non-calendar year plans have two options: (1) start offering adequate and affordable coverage to all full-time employees for the plan year beginning in 2014, or (2) potentially have a second, mid-year open enrollment for coverage to take effect January 1, 2015. In other words, an employer with a July 1 plan year may want to comply by July 1, 2014.

2. Many employers needed to start measuring hours by October 2013.

For employees whose hours vary so that the employer cannot reasonably determine whether they are expected to work full-time (such as substitute teachers or nurses), and seasonal employees, the employer may use an optional look-back period to determine whether the employee averaged 30+ hours of service per week (or 130+ hours of service per month). If an employee was considered full-time during this measurement period, the employee must be treated as a full-time employee for health coverage purposes for a subsequent stability period regardless of the employee’s number of hours worked during the stability period, so long as the individual remains an employee. For a January 1, 2015 plan year, to measure for 12 months and have an administrative period to enroll individuals in the coverage, the employer would need to start counting hours as early as October 2013. Non-calendar year plans may have measurement periods that start even earlier.

Employers also need to remember that measuring is not a one-time event but rather an ongoing activity. In fact, every month employers will need to calculate which variable hour employees who completed the first measurement period following their dates of hire will need to be treated as full-time for health coverage purposes. In addition, in order to avoid the fall off the cliff penalty, an employer will need to ensure at least 95% of full-time employees are offered health coverage or pay a monthly penalty of 1/12th x $2,000 x all full-time employees (even those who received benefits). Employers may want to implement software to assist with monitoring on a real-time, ongoing basis.

3. Employers may need to implement an hours tracking/Free Rider penalty monitoring system.

Counting hours worked for purposes of the Free Rider penalty is more complicated in practice than it may first appear. To give just one example, there are specific rules for how you credit hours for employees who receive a salary or are paid a flat amount per day of service. The proposed regulations give employers two choices for how to count those hours: (1) use actual service records showing when the employee worked, or (2) give eight hours of credit for every day the employee worked. The difference between these two choices is very important. For example, if an employer has a variable hour employee whose contract states a workday is six hours and the employee works four days a week for six hours, the employee worked a 24-hour week. Under the Free Rider penalty, a full-time employee is defined as working 30 or more hours per week, so in this scenario the variable hour employee would fall under the 30-hour threshold and be considered part-time for health coverage purposes. If instead the employee worked four days per week and the employer had to give eight hours of credit for each of those days because the employer was not tracking hours of service, that employee would be deemed to have worked 32 hours and would need to be treated as full-time for health coverage eligibility purposes.

Adding this with the previous concern of when to start measuring hours, employers may want to have a mechanism in place by October 2013 for variable hour employees to sign in and out, so a service record of actual hours worked is available and employees do not have to be defaulted to eight hours of service. Again, this is only one example of the complexity associated with crediting hours for purposes of the Free Rider penalty.

4. Employers may want to implement their strategies with time to test and refine before penalties start being assessed.

Certain strategies that employers are considering may not work as well in practice as they do in theory. For example, some school districts have discussed limiting hours of substitute teachers to 130 per month. However, that creates an issue for students if a teacher is on a long-term leave of absence. To adopt such a strategy, the employer would also need to ensure they have mechanisms in place to accumulate all hours worked, receive timely notification that an employee is nearing the 130-hour threshold, and limit the ability of the employee to work additional hours that month. Employers may want to implement new policies such as these sooner rather than later while there is time to test and refine them before penalties start being assessed.

Further, although employers should feel some relief with the enforcement delay, they should continue to work diligently on compliance because future enforcement may be more stringent given the ample time available for employers to develop and implement their compliance strategies. Certain strategies may take several months to implement. For example, many employers are considering the addition of a low cost coverage option to ensure at least one affordable option is available to all full-time employees. Others are looking at changing from a composite rate to tiered rate structure given that only employee (not dependent) coverage is required to be affordable in order to avoid triggering a penalty. Planning and implementation for strategies such as these take time, particularly if employee benefits are subject to collective bargaining.

5. Employers may want to seek approval from their governing bodies prior to implementing their strategies.

From a practical standpoint, many employers are adopting strategies that assume they will pay a penalty in certain situations. Some employers will make coverage available to all full-time employees (to avoid falling off the cliff) but will not pay enough of a contribution to ensure coverage is affordable to all classes of employees. These employers assume some people will qualify for a federal premium tax credit, which triggers a Free Rider penalty for the employer.

While this may be a good strategic option for an employer, it would be wise to have appropriate governing bodies (such as insurance committees and/or board of directors) review and approve such plans before they are implemented, and before receiving the first bill from the IRS.

These are only a few of the pitfalls and serious penalty issues for the unwary that come with managing the Free Rider penalty, not to mention the other Health Care Reform provisions affecting employers that can also produce substantial fines in the near future. It has never been more imperative for Health Brokers and Consultants to be educated themselves and engaged with their clients, seeking out the best compliance consulting available to them, as the penalties for non-compliance can be devastating.

As a consultant myself to many large clients, many of them public sector clients, I know that I must partner with other specialized professionals, and seek out their expertise and consulting services if I am going to truly serve and retain my client relationships in the unchartered waters we have all found ourselves in. No longer can anyone be afraid to tell the -client exactly what they need to hear, as the consequences to them could be devastating, and no one should ever take such risk with their clients.

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Toney Chimienti is president and Founder of Chimienti & Associates Insurance Services, a Managing General Agency, and has been in the Worksite Market for over 30 years. Chimienti & Associates is the only brokerage firm on a national basis permitted to market both group and individual benefit plans for American Fidelity Assurance, excluding school districts. CAIS utilizes American Fidelity Administrative Services, LLC (AFAS) to consult on all PPACA issues as it pertains to CAIS clients. CAIS extends these highly specialized and sought after services to their general agents and brokers nationally.

Toney can be reached at info@chimienti.com. The agency phone number is 559-733-1670. The website is chimienti.com. This article does not discuss labor and employment issues, including possible discrimination claims. You should consult your legal advisor on any such issues.

California Broker’s Annual HMO Survey–Part II

Welcome to the 17th annual agents’ guide to managed care. Each year California Broker surveys health maintenance organizations (HMOs) in the state with direct questions about their plans. We then present the answers to such questions here for you—the professional agent or broker. We hope that this valuable information will help you serve your savvy healthcare clients better.

Note I: A few responses were shortened to fit into the magazine. Where noted, please check with the company for more information. Note II: Anthem Blue Cross is not participating in the HMO survey this year.

18. Which requested procedures are denied most frequently based on experimental investigative or not medically necessary exclusions?

Aetna: This information is not readily available.

Blue Shield of California: The following are the most frequently denied procedures due to the absence of medical necessity or because they are considered experimental/investigational:

• Bariatric surgery – morbid obesity surgery

• Reduction mammoplasty

• Varicose veins

• MRI of the breast

• PET Scan of the breasts

Cigna: This data is not available.

Health Net of CA: The most frequently denied requested procedures are those that are not FDA approved/accepted in the medical community as standard, safe and effective.

Kaiser Permanente: If a plan physician determines that a procedure or service is medically appropriate for a member and its omission would adversely affect the member’s health, then it is considered medically necessary. As a result, we do not consider a medically necessary service or procedure to be an exclusion. Additionally, we do not deny experimental or investigative procedures if they are considered medically necessary and appropriate for the member’s care. All procedures and treatments are reviewed on a case-by-case basis with the determination for care made by the doctor often in consultation with the chiefs of service for their own area of practice and other related areas of practice.

PacifiCare: This information is not available. We do not track the number of most frequently denied investigational/experimental or not medically necessary procedures. We do track appeals and grievances. If a member appealed a denial, and it was due to one of the above reasons, we may be able to provide that procedure; however, it would not apply to our book of business.

19. What is the standard hospitalization for normal and a Caesarean birth?

Aetna: The physician determines it.

Blue Shield of California: The standards are two days for a normal birth and four days for a Caesarean.

Cigna: Typical hospitalization is at least 48 hours for normal vaginal delivery and at least 96 hours for a Caesarean section. But, this can be modified based on the physician’s recommendations

Health Net of CA: Standard hospitalization for normal birth is two days and four days for Caesarean birth

Kaiser Permanente: According to our 2012 HEDIS scores, in Northern California the average length of hospital maternity stay for all types of births is 2.41 days and 2.48 days in Southern California. We no longer separately track hospitalization stays for C-section deliveries.

PacifiCare: The average length of stay is two days for a normal birth and four days for a Caesarean.

20. How many hospital days are utilized in a year for every thousand HMO members?

Blue Shield of California: Our most recently reported utilization rate for inpatient days per 1,000 was 157.79.

Cigna: Data not available

Health Net of CA: 2012: 200.9 days per 1,000 HMO members.

Kaiser Permanente: According to our 2012 HEDIS scores, in Northern California, the ratio is 3.32 hospital days per 1,000 members and 3.37 hospital days for Southern California

PacifiCare: Our total in-patient utilization in 2010 was 160.92 per 1,000 members.

21. What are your loss ratios, administration/medical?

Blue Shield: Our medical loss ratio (MLR) percentages filed for 2012 are as follows:
MLR by Lines DMHC-regulated CDI-regulated of Business Plans Plans
Individual and Family 81.3% 78.0%
Small Group 76.6% 84.2%
Large Group 89.4% 84.8%

Cigna: This information is publicly available through reports we submit to federal and state regulators.

Health Net of CA: In 2012, the medical care ratio was 87.7% and the administrative loss ratio was 10.3%.

Kaiser Permanente: Based on our 2011 DMHC Annual Report, our administrative loss ratio plan-wide was 4.33 percent and our medical loss ratio was 94.63 percent. It should be noted that we no longer use the phrase “Medical Loss Ratio,” using instead “Medical Benefit Ratio” (MBR) whenever possible. Along with many others in health care, we feel that MBR is a more accurate and descriptive means of describing this important ratio.

PacifiCare: As of December 31, 2011, our commercial medical loss ratio for PacifiCare of California is 85.4 percent. The administrative ratio is 7 percent.

22. Is your plan NCQA accredited?

Aetna: Yes, Aetna Health of CA Inc is accredited and has got Quality Plus distinction in Care Management, Physician and Hospital Quality.

Blue Shield of California: Yes.

Cigna: Yes, our HMO plan has received NCQA’s accreditation level of Commendable. In addition, Cigna has earned NCQA’s Physician and Hospital Quality (PHQ) Certification. These standards assess how well a plan provides individuals with information about physicians and hospitals in its network to help them make informed health care decisions. Cigna has also earned an NCQA quality rating for its health and wellness programs, and all four of our behavioral health care centers nationwide have earned full accreditation from NCQA.

Health Net of CA: Yes. Commercial HMO, PPO and POS lines of business have received the “Commendable” accreditation status from the National Committee for Quality Assurance (NCQA), and Health Net’s Medicare HMO received the “Excellent” accreditation status.

Kaiser Permanente: Yes, we are. As of the third quarter of 2013, all of our service areas across the country have NCQA ratings of “Excellent,” their highest possible rating, for our HMO and Medicare lines.

PacifiCare: Yes. PacifiCare of California maintains an excellent accreditation rating.

23. What is your ratio of PCPs vs. specialists?

Blue Shield of California: 1/2.09

Cigna: Data not available

Health Net of CA: 2013: 1 to 3.0 specialists.

Kaiser Permanente: The statewide ratio in California of primary care physicians to specialists is approximately 1 PCP to 1.8 Specialists. Primary Care includes general practice, family medicine, general Internal Medicine, and general Pediatrics. Specialty care includes OB/Gyn.

PacifiCare: As of June 30, 2011, our ratio of PCPs to specialists is 1 to 3.1.

24. What is your ratio of members to PCPs?

Aetna: 21:3

Blue Shield of California: 79.46/1

Cigna: 14/1

Health Net of CA: 2013: 51.0 members to 1 PCP.

Kaiser Permanente: We don’t ordinarily release information on our member-to-doctor ratio. Physician and care provider totals are based on current and projected membership numbers. Providing members with access to physicians is essential to delivering high-quality care and to ensure it, we have developed access standards to help meet our members’ needs. Monitored continuously, these standards are used to help determine the number of physicians and care providers needed as well as the location and size of our medical facilities. As dictated by membership growth and increased volume of patient visits, additional primary care physicians and specialists are added to our professional roster as needed.

PacifiCare: As of June 30, 2011, our ratio of members to PCPs is 131 to 1.

25. Does your contract include binding arbitration?

Aetna: Yes.

Blue Shield of California: No, Blue Shield members are not subject to binding arbitration and there is no arbitration provision in the Evidence of Coverage (EOC) provided to members. However, the majority of our contracts with providers include binding arbitration to resolve disputes.

Cigna: Yes.

Health Net of CA: Yes.

Kaiser Permanente: Yes, we use binding arbitration to resolve disputes. We find arbitration to be more attuned to the discussion of sensitive matters such as medical and more appropriate for the resolution of disputes with persons who, in many cases, continue to be Health Plan members. Other than Small Claims Court cases, claims subject to a Medicare appeal procedure, or ERISA-regulated benefit claims, arbitration is used to resolve disputes such as those for premises or professional liability matters, including claims alleging medical malpractice.

PacifiCare: Yes, our contract includes binding arbitration.

26. How often can members change their PCP at will?

Aetna: There is no limit.

Blue Shield of California: Access+ HMO members can change their personal physician without cause once a month. This change is effective the first day of the month following notice of change.

Cigna: We encourage our customers to stay with one primary care physician to ensure more effective care management. We also recommend that people not change their doctor while in the middle of care to the extent possible. Customers may request a PCP change once per quarter and/or if their residence or work location changes. Additionally, if a customer has a concern about care quality, he or she can change PCPs after notifying us of the concern.

Health Net of CA: Members may change PCPs within a physician group or from one physician group to another once per month.

Kaiser Permanente: Members can change their PCP at any time and as often as they like. Members can change their PCP online at kp.org, by calling the Physician Selection Service or Appointment/Advice line at their local medical facility, or through the Member Services Department at their local medical facility. Studies have shown that a positive, ongoing relationship with their PCP helps to improve health outcomes and member satisfaction, so we encourage members to choose a PCP who’s right for them and provide the support and systems to make it easy for them to do so.

PacifiCare: Members may request a change of individual provider or provider group at any time, for any reason. Requests received between the first and the 15th of a month take effect on the first day of the next month. Requests received between the 16th and the end of the month take effect on the first day of the second month. Members must select participating providers accepting new patients within 30 miles of their home or work and can identify which providers are accepting new patients by calling our Customer Service department, looking in our provider directory or visiting our Web site.

27. Do you offer a performance guaranty, such as employees will be on the computer by a certain date or have ID cards by a certain date, for example?

Aetna: Yes, we can offer standard performance guarantees to our clients; guarantees may also be customized on a case-by-case basis.

Blue Shield of California: Yes, we offer performance guarantees for groups with a qualifying minimum subscribership.

Cigna: Yes, in most instances, we can work with a company to develop appropriate performance guarantees.

Health Net of CA: Yes, Health Net of California negotiates performance guarantees with clients based on our Corporate Performance Standards, which are derived from marketplace expectations balanced with internal administrative capabilities. An employer group must have and maintain after the plan’s effective date a minimum of 1,000 subscribers in a Health Net of California plan to qualify for performance guarantee consideration. Once the client has been deemed eligible for performance guarantee consideration, Health Net is willing to discuss and negotiate the specifics of a performance guarantee package including appropriate target levels for standards of concern. Health Net of California provides customers with specific performance guarantees in the area of claims administration, including processing turnaround time (measured within 30 calendar days) and transactional accuracy (i.e. financial, payment, coding and overall). In addition to claims administration, Health Net of California offers corporate performance standards that span all aspects of our business in the areas of: implementation (i.e., identification card production, timeliness and accuracy), member services, provider network, medical management, member satisfaction, customer reporting, and HEDIS reporting. All products can potentially be covered, with the exception of our Medicare HMO due to strict guidelines already in place by the Centers for Medicare & Medicaid Services (CMS). All performance standards are evaluated on an annual basis for compliance. An annual performance standard report, including the calculation of any applicable penalties, is produced approximately 90 days after the close of the plan year.

Kaiser Permanente: Yes, our performance guarantees are made on a group-by-group basis. Our target is for new members to be in our data base with 24 hours of our receiving their information and to have new or replacement ID cards delivered within 7 to 10 work days 90 percent of the time.

PacifiCare: We may agree to performance guarantees upon approval and if the client meets our standard requirements for enterprise-wide performance standards. However, we typically do not agree to performance guarantees for fully insured groups.

28. When a member moves out of state, is any transition coverage available?

Aetna: We have HMO plans in many states; a member might be eligible for coverage in another Aetna HMO service area. Customers may also offer out-of-area plans which provide PPO coverage if members are outside an HMO service area.

Blue Shield of California: Yes, if a subscriber moves out of state to an area served by another Blue Cross and/or Blue Shield plan, the subscriber’s coverage can be transferred to the plan serving his new address. The new plan must offer the subscriber at least its group conversion policy.

Cigna: Yes, if we offer similar coverage to the account in that state.

Health Net of CA: Yes, through PPO, POS, and indemnity lines of business.

Kaiser Permanente: Yes, transition coverage is available to members moving out of state and staying in-network as well as to those moving out of network. Members receive coordinated care from providers who are linked together via Kaiser Permanente HealthConnect(r), our electronic medical record system. As a fully integrated health care delivery program, we’re well positioned to provide our members with seamless transitions through outpatient, inpatient, and specialty care services from region to region. This integrated system provides physicians maximum access to members’ medical information, allowing them to provide high quality health care through transitions. Members leaving our plan altogether are also provided with reasonable assistance to enable a smooth transition with no additional expenses to the former member for transition services. If a member is confined in a facility on the date coverage is terminated, benefit coverage will continue only under the conditions as per the Group Agreement.

PacifiCare: If a member moves out of the state permanently, they are no longer in our service area and would be terminated from the plan. Members must live within our service area to be eligible for continued enrollment in our health plan. Members traveling outside their PacifiCare service area for a limited time are covered for emergency services. This also applies to out-of-area student dependents who must also maintain a permanent residence within the service area in order to enroll in the health the plan.

29. Describe the utilization process.

Aetna: Information is gathered from the physician and patient. The nurse consultant or physician reviewer and the attending physician discuss whether a test or treatment is appropriate. The physician reviewer can recommend alternative treatments and further testing. Protocol is reviewed annually. The consulting specialists, who are most familiar with procedure, review and approve any changes.

Blue Shield of California: Blue Shield delegates utilization management to our contracted IPAs/medical groups. We audit these processes annually to ensure compliance with our medical policy guidelines.

Cigna: Cigna physicians and nurses perform utilization management for inpatients in coordination with medical groups. To help ensure appropriate care and facilitate discharge planning, Cigna reviews medical records for hospitalized customers and consults with physicians via nurses located on-site at hospitals or by phone. Utilization review for most outpatient services is delegated to IPAs/Medical Groups. Cigna reviews inpatient procedures and hospitalizations, outpatient surgical procedures performed in a facility, transplants, and investigational therapies using Milliman Care Guidelines and Cigna Coverage Positions. Cigna utilization nurses (RNs) also conduct case management. Most outpatient referrals for specialists and procedures do not require prior authorization as long as the primary care physician requests them. However, Cigna performs utilization review of select outpatient services when there is demonstrated value.

Health Net of CA: Health Net provides a multi-dimensional utilization/case management (UM/CM) program to direct and monitor health care services. It involves pre-service, concurrent, and post-service evaluation of the utilization of services provided to members. The UM/CM program is structured to ensure that qualified health professionals make medical decisions using written criteria based on sound clinical evidence without undue influence of Health Net management or concerns for the plan’s fiscal performance. In addition, Health Net delegates some of its Utilization Management (UM) program to our Participating Physician Groups (PPGs). The approval process for delegated Utilization Management programs and policies includes the on-site, comprehensive annual review; development of Corrective Action Plans (CAP) as required by audit results; follow-up assessments to ensure CAP implementation; and presentation of findings to the designated committee for discussion. Health Net has a staff of Registered Nurses responsible for managing this review process for each of their assigned PPGs. PPGs with delegated responsibilities for UM are required to develop and implement a written UM Program that documents all facets of delegated authority and outlines the structure, accountability, scope, criteria, and processes of all UM services, including basic Case Management and care coordination. The Program must be revised, reviewed and approved by the PPGs’ UM Committee and/or board of directors at least annually.

Kaiser Permanente: Our physicians plan member care and work collaboratively with their peers to ensure that there are appropriate treatment plans and use of resources. Utilization-Management staff are available to support doctors in the management of member’s health care needs throughout our continuum of care and provide a variety of services such as discharge planning, utilization review, and care management. The majority of utilization management, including reviews, is conducted internally as part of our integrated system of health care delivery. Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, and the Permanente Medical Groups work in partnership to provide and coordinate medical management and review for our Health Plan members.

PacifiCare: We use industry-leading medical management programs to ensure that each enrollee receives the appropriate care necessary and that we control unnecessary health care costs for our clients. Our medical management programs focus on reducing variation, improving the quality of care provided and ensuring cost effectiveness. We base medical decisions on scientific evidence and all of our medical management services include physician guidance and input. We developed online, science-based and objective utilization management criteria as well as technology-based clinical decision support systems related to case, utilization and disease management.

30. Describe the Case Management Process.

Aetna: The following are some ways in which cases are identified: through the PCP or pharmacy, during certification reviews, during PMG/utilization management case reviews, and through other internal reporting and sources including member services, claims, and specialty programs. The case manager coordinates services for members who have multiple and complex needs. The case manager works with the PCP and the member to develop a care plan identifying services, frequency, duration, and goals. A team approach includes the PCP, specialist, member, family, caregiver, healthcare provider community, and internal programs to coordinate care, with a focus on member education and maximizing quality outcomes.

Blue Shield of California: Case management focuses on early identification and management of members with potentially long-term and catastrophic healthcare needs. Using claims, authorization, and pharmacy data, we identify potential candidates for case management. The case manager helps identify appropriate cost-effective treatment options, and follows members who are receiving alternative levels of care, such as inpatient rehabilitation, skilled nursing facility care, long-term home health services, and hospice services. Members who are using an acute facility three or more times in a six-month period can also be identified for case management. Utilization management, claims, and other medical operations team members can request case management for specific situations. Family members and providers can also request case management.

Cigna: Customers are identified via real-time and claims-based predictive modeling tools, along with referrals from physicians and medical groups, Cigna clinical staff, and employers. Case managers collaborate with physicians, medical group case managers, customers, and employers to facilitate ongoing treatment plans and support the primary care physician. Case managers monitor short-term and long-term goals for inpatient and outpatient care. They document and evaluate the effectiveness of the services provided. In addition to traditional complex and catastrophic case management, Cigna has a number of specialty case management units. They are staffed with RNs who are dedicated to areas such as high-risk maternity, neonatal intensive care, oncology, obesity, and transplant. Cigna has an extensive suite of chronic condition management programs, including those for obesity complications and depression. Cigna also offers telephonic and online access to wellness information, care management services, and health coaching programs.

Health Net of CA: Health Net and its delegates provide case management/disease management programs to deliver individualized assistance to members in all lines of business who are experiencing complex, acute, or catastrophic illnesses or have exceptional needs. Health Net provides outreach to members with chronic conditions such as asthma, diabetes, COPD, heart failure, coronary heart disease, uses population-based risk stratification and predictive modeling; and partners with physician groups to improve performance. Health Net offers Disease Management, Ambulatory Case Management, Complex Case Management, NICU and High-Risk OB Case Management.

Kaiser Permanente: Members in need of case management are identified through clinical and utilization data, pharmacy records, hospital and outpatient visits, and laboratory results. Members can also self-refer to case management or be referred by a doctor or family member. Our case managers are master’s-level clinicians or registered nurses who work directly with a member and their health care team to plan care and provide intensive coordination of services, including inpatient hospitalizations, transitional care, home care, skilled nursing, medications, referrals to community resources, and outpatient care. Using an interdisciplinary approach, case managers help to ensure continuity of care including utilization management, transfer coordination, discharge planning, and obtaining all authorizations or approvals as needed for outside services for members and their families. They’re also responsible for identifying quality-of-care problems and monitoring utilization issues.

PacifiCare: We designed our case management program to identify, intervene, coordinate and monitor care plans that provide high quality and cost-effective care for covered persons with catastrophic and complex health care needs. Our case managers facilitate communication and coordination of care between all parties on the health care team. This program involves the patient and family in the decision making process to minimize fragmentation in the delivery of health care. The case manager assesses the needs of the patient and educates them and the health care delivery team about case management, community resources, insurance benefits, cost factors and issues in all related topics so that informed decisions can be made. The case manager is the link between the patient, the providers, the payer and community.

31. Can the PCP participate in profits or losses in any way at the plan level or the participating medical group/IPA level?

Aetna: In California, Aetna participates in the IHA/7 health plan program of pay-for-performance. PCPs can participate in that IPA pay-for-performance bonus.

Blue Shield of California: For our HMO physicians and medical groups, our Pay for Performance program recognizes and rewards physician organizations for effectively managing utilization of services provided to members for inpatient utilization and readmissions, emergency room utilization, outpatient surgeries, and generic drug prescribing.

Cigna: The primary care physician does not participate in plan profits or losses in any way. The relationship between the PMG/IPA and the PCP is based on the contract between the two parties.

Health Net of CA: In 1993, Health Net of California introduced the Quality Care Improvement Program (QCIP). At the time, it based medical group compensation on member satisfaction scores. This program was enhanced in 1998 by incorporating quality-of-care outcomes into the compensation formula. In addition to contracted compensation, QCIP evaluates medical groups based on member satisfaction rates, quality-of-care outcomes, and collaboration. Additionally, Health Net evaluates medical groups’ cost performance measures. Similar to most health plans, shared-risk pools are incorporated with the compensation details for each Participating Physician Group (PPG). When the budget is established for the PPG’s medical services and hospital care, the PPG shares in the savings if costs do not consume the budget. Conversely, the group shares in paying for additional costs if the cost of care exceeds the budgeted amount. However, at no time does Health Net favor cost performance over quality. Recently, other California health plans have added programs similar to Health Net’s QCIP.

Kaiser Permanente: The primary compensation method used by all the PMGs is salary. Small amounts of additional compensation may be provided for things such as achievements in quality or member satisfaction. Our physicians are incentivized to make patient care decisions based on medical needs because our capitated model is based on collective performance, rather than individual physician performance, and our physicians are compensated primarily by salary. Medical Group uses that money to pay its doctors and other personnel, and to meet its other expenses. The primary compensation method used by all of the Medical Groups is salary. Salary generally varies with medical specialty and tenure.

PacifiCare: We use a Quality Incentive Program (QIP) through which medical groups and IPAs can earn additional revenue by improving and maintaining patient safety, patient satisfaction, and quality of care. The QIP measures key indicators of quality in hospitals and medical groups based on the groups’ service and clinical quality. The QIP rewards medical groups and IPAs for attaining the required performance. The better a provider group performs in these categories the more QIP dollars they can earn. In 2003 the QIP was funded with $14 million and rewarded seventy-fifth percentile performers in 16 measures. Over 140 medical groups received rewards in 2003 and we achieved average mean score improvements in 12 of the 16 measures. In turn, average improvement for these measures increased 30 percent, a remarkable achievement. In 2004 our QIP expanded to include 20 measures, of which 17 improved an average of 20 percent. The incentive pool was $18 million in 2004 and is $65 million in 2005. In 2006, we paid out more than $96 million.

32. How are premiums and risk shared among the plan, MG/IPA

Aetna: The premium is not shared with providers. In California, we have some IPA risk share arrangements and an IPA or medical group share in savings if a target budget is not exceeded.

Blue Shield of California: The majority of the contractual arrangements between Blue Shield and the IPA/medical group do not have a shared risk component; instead, the IPA/medical group is capitated for the professional services and is responsible for its own risk, and Blue Shield is at risk for the institutional component of the relationship.

Cigna: Most medical group and IPA arrangements are capitated. Capitation does not contain provisions for withhold payments. For example, a lump sum is withheld and distributed later if the provider meets certain utilization targets. The standard contract is shared risk with Cigna retaining risk for inpatient facility charges.

Health Net of CA: The majority of HMO physician services are paid under a pre-paid capitation payment to the contracted participating physician group (PPG). The PPG, in turn, reimburses the physician directly for services.

Kaiser Permanente: Kaiser Foundation Health Plan (KFHP) exclusively contracts with the Permanente Medical Group (TPMG) in Northern California, and the Southern California Permanente Medical Group (SCPMG) to provide comprehensive medical services to KFHP members. Each year at Kaiser Permanente, the Health Plan and the Medical Group in each region negotiate and agree on the total amount of money that is estimated will enable our physicians and other clinicians to provide the amount of professional medical care that our members are expected to need in the upcoming year. This estimate is based on the previous year’s performance (and the years prior to that), and also includes administrative and other expenses associated with operating the Medical Group.

PacifiCare: Currently all of our contracted medical groups and independent physician associations (IPA) participate in a risk-sharing arrangement. In addition, we contract with several networks of individual physicians in rural areas that do not participate in risk sharing. We contract with multi-specialty medical groups and independent physician associations (IPA) primarily through split or professional capitation contracts. Both contracts provide a monthly age, gender and benefit adjusted capitation.

33. What happens when a member provider bills a participant for services? How do you deal with the fact that the participant is at financial or credit risk when the dispute is between the provider and the plan?

Aetna: Participating providers are required to accept payment (plus member’s co-payment) as payment in full. Balance billing is not permitted.

Blue Shield of California: Our member service representatives typically resolve these cases by contacting the provider’s office to clarify the correct member liability. Our providers are contractually prohibited from holding members responsible for any charges other than deductibles, co-payments, or non-covered services.

Cigna: First, it’s important for customers to know that using hospitals and doctors who are a part of the network protects them from balance billing because in-network health care professionals agree as part of their contracts not to bill individuals for amounts beyond what their plan pays. If Cigna receives a complaint from a customer who has received such a bill, we work with the contracted health care professional to educate him/her on the terms of the contract. We also require that the health care professional stop billing the customer. Our customer service representatives are available by phone 24 hours a day, seven days a week to assist our customers with any questions about a claim or bill they have received. We also work with our health care professional partners to make the claim payment process as efficient and accurate as possible.

Health Net of CA: Health Net’s HMO contracts have a hold-harmless clause that prohibits medical groups from billing or collecting from members, except for standard co-payments and non-covered services. In the event a provider balance bills a member, Health Net removes the member from the situation and resolves the matter directly with the provider.

Kaiser Permanente: As a precipitated group practice HMO, we do not bill members for individual services. Kaiser Foundation Health Plan (KFHP) contracts with The Permanente Medical Group (TPMG) in Northern California and the Southern California Permanente Medical Group (SCPMG) to provide comprehensive medical services exclusively to KFHP members. Our providers are reimbursed at negotiated capitation rates so no disputes between the providers and the health plan would put members at financial or credit risk.

34. Do you have a nurse or RN on call 24 hours for questions at the plan level? At the PMG/IPA level?

Aetna: Yes, the Informed Health nurse-line is available to members. Network doctors are required to be available 24 hours a day.

Blue Shield of California: Yes, as part of Blue Shield’s NurseHelp 24/7 program, members can get around-the-clock online and telephone access to a registered nurse for confidential advice and information about minor illnesses and injuries, chronic conditions, fitness, nutrition, and health related topics.

Cigna: At the plan level, Cigna offers a 24-hour health information line staffed with nurses.

Health Net of CA: Health Net’s Nurse 24 line offers support for both members and physicians. Members can obtain support on a 24/7 basis from experienced clinicians. The clinicians are nurses licensed in the member’s state and are ready to provide support for members for health and wellness concerns, decisions, and questions. Physicians can make referrals on a 24/7 basis via Health Net’s provider portal. Physicians can also receive support, make referrals, and get information during business hours by calling 800-893-5597 and pressing option #2.

Kaiser Permanente: Yes. Members can easily reach our specially trained advice nurses by telephone 24 hours a day, seven days a week. Using approved protocols, our advice nurses perform comprehensive triage to help members assess their symptoms and determine the level of care they need, such as self-care, an appointment with their PCP, a visit to urgent care or emergency department, or a call to 911. When certain criteria are met, our advice nurses can also arrange for “telephone treatment” where members can get needed prescriptions for certain common conditions, including urinary tract infections, conjunctivitis, and sinusitis without having to make an unnecessary visit to urgent care or their doctor’s office. Our nurse advice service is fully integrated into our system of care, not a separate carved-out service. This integration gives our advice nurses instant access to information in our members’ electronic medical records, which enables them to provide more individualized assistance to our members. It also makes it easy for an advice nurse to send a message to the member’s personal physician about the call and its outcome and, when appropriate, facilitate continuity of care and the provision of any needed follow-up services.

PacifiCare: Yes, at the plan level there is a 24-hour nurse line and medical audio library. Members can listen to pre-recorded health topics or speak with a licensed registered nurse. The nurse line staff can provide general counseling and triage recommendations. At the PMG/IPA level, PCPs are contractually required to provide after hours call coverage.

35. Do you include treatment by a physician’s assistant (PA) or nurse practitioner (NP), rather than by a physician? Do you guarantee a physician exam for adults when requested by the patient?

Aetna: Yes, but physicians using PAs or NPs are required to oversee services. Members have a right to request a PCP.

Blue Shield of California: Yes, Blue Shield members can elect to be treated by the NP or PA practicing in their PCP’s office; however, the physician partners are responsible for managing treatment decisions. We also guarantee a physician exam for adults.

Cigna: Yes, when appropriate, physician’s assistants or nurse practitioners can work together with a physician. Yes, customers can request an annual physical examination.

Health Net of CA: As long as a physician’s assistant or nurse practitioner is under the physician’s guidance and providing treatments under the scope of his or her license, treatment is covered. Members have the right to have exams conducted by physicians rather than physician assistants or nurse practitioners.

Kaiser Permanente: Yes, members have the option to request treatment by a PCP, physician’s assistant (PA), or nurse practitioner (NP) when they are available and when medically appropriate. PAs and NPs are licensed health care practitioners who work in a variety of specialties, including pediatrics, obstetrics/gynecology, cardiology, pulmonary medicine, and gastroenterology.

PacifiCare: Yes, treatments by Physician’s Assistant (PA) and Nurse Practitioner (NP) are included. However, the member has the right to request a physician examination.

36. Can doctors be terminated for over utilizing services?

Aetna: When inappropriate use of services, under/overutilization or quality issues are identified, the provider is counseled; an action plan for improvement is developed; and service activity is monitored. The provider could be terminated if performance does not improve.

Blue Shield of California: Typically, Blue Shield providers are not terminated based on utilization issues. However, regional medical directors issue quarterly HMO profile reports evaluating performance to IPAs and medical groups. These medical directors meet regularly with IPAs and medical groups to discuss quality and utilization data. Quality improvement and utilization review plans are reviewed and corrective action plans are developed as necessary. Blue Shield monitors effectiveness and provides counseling, education, and sanctions.

Cigna: Cigna has never terminated a physician’s contract for over utilizing services unless there was evidence that it was hurting the quality of care or was fraudulent.

Health Net of CA: A Health Net peer review team measures and rates adverse action material submitted by providers and various primary source agencies, including the Medical Board of California, the National Practitioner Data Bank, the Healthcare Integrity and Protection Data Bank, Medicare/Medicaid Sanctions, Office of Inspector General, opt-out Medicare reporting, and the claims history for credentialing and re-credentialing. Health Net also investigates allegations made in the community and by the media. The provider has a right to appeal the decision through a fair hearing. Health Net uses quality data in physician management and evaluation to help identify potential provider issues.

Kaiser Permanente: Our integrated health care system ensures that not only our doctors, but also our entire network functions at optimal efficiency to manage utilization by implementing best practices. Outcomes from HEDIS and internal utilization reports are available online to doctors and administrators to help them assess appropriate care and access levels, capture long-term performance trends, and identify areas of potential over utilization and underutilization. Utilization reports are also used to drive improvements in quality, access, and member services that result in improved outcomes, increased member satisfaction, and lower costs. Exceptions to best practice guidelines are identified, investigated, and corrected as needed.

PacifiCare: Yes. We have terminated a small number of contracts with participating practitioners as well as delegated providers for failing to adhere to quality standards, typically less than one percent annually. The precipitating events included behavior presenting a potential risk of imminent harm to PacifiCare members and behavior contrary to the requirements of state and federal law. Our termination procedures adhere to contractual and regulatory requirements, and include informing the provider with required appeal rights and description of the appeal process.

37. How do you determine with which providers to contract? Do providers get incentives for refusing to contract with other plans (for example, to maintain a semi-exclusive relationship with a managed care plan)?

Aetna: It is monitored based on geographic access with the necessary mix of physician specialties and hospital services. An annual study determines the availability of PCPs relative to residence of member population. Providers don’t get incentives for refusing to contract with other plans.

Blue Shield of California: Blue Shield provider contracting uses criteria based on national guidelines, which address credentialing, licensure, accreditation, affiliations, disciplinary actions, access, cost effectiveness, and quality of care. Blue Shield does not give providers incentives to limit contracting with other managed care plans.

Cigna: Contracting is based on geographic, business, and customer needs. Health care professionals must meet credentialing criteria including verification of education and license status. There are no exclusive or semi-exclusive relationships.

Health Net of CA: To ensure the quality of the Health Net network, all potential Participating Physician Groups (PPGs) are subjected to intensive reviews to ensure they meet or exceed Health Net’s guidelines in the areas of medical management, financial viability and stability, and network accessibility. No incentives are given for refusing to contract with other plans.

Kaiser Permanente: Kaiser Foundation Health Plan (KFHP) contracts exclusively with the Permanente Medical Groups in Northern and Southern California to provide comprehensive medical services to members including primary care, specialty care, laboratory, and imaging services. Our doctors do not contract with other plans. On occasion we will contract health care services from doctors, usually specialists, who are required by their contracts to provide the same high-level of medical and personal service as that from our own internal doctors.

PacifiCare: Once we determine that network expansion is necessary, we research available providers in that area. We contact prospective providers for detailed assessments on their credentialing, quality assurance, and administrative capabilities. Before contracting, we assess area needs and hold initial discussions to gauge mutual interest. If this initial assessment is satisfactory, a provider delivery systems team begins contract negotiations. The length of the process varies depending on the urgency of need for additional providers and the availability of these providers during the auditing and contracting process. The process usually takes from two to six months. We do not offer anti-competitive incentives to any physician.

38. How can a member get information about a doctor’s schooling and malpractice suits?

Aetna: Plan service professionals have access to the plan’s national provider database, which generally includes the medical school of graduation; also members can view DocFind, our online provider directory at www.aetna.com. Malpractice information is not available.

Blue Shield of California: Members can access information about a provider’s education on our award-winning website, www.blueshieldca.com. To get information about malpractice suits, members can contact (for a fee) the National Practitioner Databank in Washington, D.C.

Cigna: Customers can call our customer service department or look up the information on myCigna.com. Malpractice information is available to the public through the state medical board website. A peer review committee, staffed by Cigna-employed doctors and non-employed doctors, reviews individual physicians’ histories before credentialing and re-credentialing the physician into the Cigna network

Health Net of CA: Members may contact Health Net’s Customer Contact Center to get information about a participating physician’s schooling. Members may also access Provider Search at www.healthnet.com for physician languages, board certification information, provider-specific information, and weekly or daily provider updates. Members may contact the Medical Board of California, the American Medical Association, or the applicable specialty board for information about a doctor’s malpractice suits.

Kaiser Permanente: Each medical center maintains physician information, which members can access to verify licensure, medical school graduation, residency, and fellowship training, and board certification. Members can also find physician bios and background information at kp.org and can also contact the California Medical Association for malpractice information on any doctor.

PacifiCare: The member can call customer service for educational history, licensing information and board certification. The member can call the Medical Board of California for malpractice information.

LTCI Challenges–Tips for Producers on Addressing the Key Objections of Long-Term Care Insurance

by Colleen Goldhammer

Producers face unique challenges when talking to clients about long-term care insurance (LTCI). Among the objections to LTCI are a perceived high cost, misconceptions about the government’s role in long-term care, and the overall health of the LTC industry. These reasons coupled with the sensitivity of the topic in general, create a tough environment for producers trying to communicate to their clients the benefits and the need for long-term care insurance.

Long-term care insurance is not what it used to be. Innovation is strong, and new products are being introduced to address these key objections. As a producer, knowing how to face these potential challenges, communicate new offerings, and clarify misconceptions about LTCI with your clients is imperative as the cost of not selling long-term care insurance is high both for consumers and producers alike.

Challenge 1 – High Cost

Clients who are concerned about the cost of a long-term care insurance policy should be advised of the cost of not having a policy. In 2011, the median annual national cost for a private room in a nursing home was $77,745 up 4.35% from 2010; $39,135 for an assisted living facility; and $18 an hour for in-home care, according to Genworth’s annual Cost of Care survey conducted by CareScout in April 2011.

In California, the costs are higher: $91,250 for a private room in a nursing home, $42,000 for an assisted living facility, and $19 an hour for in-home care. Given the costs, self-insuring could deplete a family’s entire savings. And once that happens these costs are then often inherited by the children of the care recipients, whose retirement savings could also take a hit.

Lastly, since premiums are based, in part, on age, the longer one waits to purchase a policy, the more expensive the policy is likely to be. Clients who are concerned about cost, should be encouraged to purchase early.

Challenge 2 – Government Benefits

While many believe Medicaid or Medicare will cover them should a long-term care event occur, that may not be the case. Producers need to be well versed in what is and what is not, covered by these government-run programs and be sure to relay this to clients to clear up any misconceptions. Uninsured medical expenses are the top financial worry among men and women age 55 and over, according to a Genworth survey. It’s important that clients are fully aware of their coverage and potential needs.

In the same regard, producers should educate clients on The Partnership Product available in California. Those with a long-term care insurance policy can be assured that if and when the need for long-term care arises, they will have more control over their long-term care decisions and be able to help protect their assets and resources should they ever need to access Medicaid.

Generally, Partnership plans provide dollar-for-dollar asset protection for policyholders. For every benefit dollar policyholders receive under a Partnership policy, they receive an equal dollar of asset protection under the state’s Medicaid spend-down requirements. As a result, participants are able to retain assets that would otherwise have to be spent down prior to qualifying for Medicaid benefits.

Challenge 3 –Denial

Many people shy away from long-term care insurance all together because of the possibility that they may not use it. However, producers should point out that nearly 70% of people over 65 need some type of long-term care services during their lifetime. At the same time, long-term care is not just an elderly issue. In fact, about 20% of people receiving long-term care services are 18 to 64, according to the survey.

Challenge 4 –Talking to Clients about LTC

Before educating clients on LTCI and debunking the myths, producers must start the conversation. Given the sensitivity of the topic, this is often difficult. However, there are resources available to producers on how to initiate the long-term care planning conversation and encourage clients to have a conversation with their loved ones. Some of the tips to share with clients on talking to loved ones include the following:

• Be straightforward and don’t take family members by surprise. Tell them that you have something important you want to talk about and do it in a comfortable, pleasant setting.

• Reference examples. Sharing recent articles and data on the issue of long-term care or sharing a situation with a friend or colleague with a similar background will make the issue more relatable.

• Lay the groundwork for thinking about future care. Ask questions about the potential game plan for care if the person gets hurt at work or falls ill and needs long-term care. Be specific on what their wishes would be if they ever did need care.

• Create a written strategy. Financial planning, estate planning, and long-term care planning are all connected. It’s important to write down specific needs and desires so that everyone involved knows what is expected both today and in the future.

It is no secret that long-term care insurance can be a tough sell, but we cannot deny the benefits and added security that a policy provides clients, not to mention the potential for earnings, increased referrals, and stronger client relationships for those who include it as part of their offerings. As such it is important to be prepared to meet the LTCI challenges head on and educate clients on the new offerings to better meet their needs. There are many online resources to help producers build their knowledge about long-term care when talking with clients.

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Colleen Goldhammer is senior vice president for Long-Term Care (LTC) Distribution for Genworth Financial. Genworth has created a site to help facilitate discussion about long-term care at genworth.com/lets-talk.

Long-Term Care Have Your Clients Thought About Planning for Long-Term Care?

by Gene Tapper, MS, LNHA
Long-term care insurance can be a critical part of your client’s retirement plan – protecting their assets and income. Sixty-seven percent of 67-year-old Baby Boomers say that long-term care (LTC) for themselves or their spouse is a top concern. Even though most people 50 and over have a retirement plan, 57% of these plans don’t account for LTC expenses. How will the extra cost of long-term care at home or in an assisted living/residential care facility affect your client and their family?

What’s Their Plan?

Your clients may not have thought about what they will do when they reach an age when they need help with tasks that they are used to doing themselves. Have they thought about where they will live, whom they will live with, or who will take care of them and at what cost? Has your client discussed their thoughts about this with anyone and expressed their preferences as to how they want to deal with long-term care issues?

Whom Does Your Client Know?

Does your client know someone who has been in an LTC situation or have they been a caregiver? Someday, your client may need long-term care if they can no longer live independently as a result of a physical illness, chronic medical condition, or severe cognitive impairment, such as Alzheimer’s disease. Personal assistance with activities of daily living (ADLs), such as bathing, dressing, and eating, is often required as well as supervision if cognitive impairment is diagnosed. The majority of long-term care users need this form of long-term care, referred to as “custodial care” or “personal care.” If your client knows someone who needed care on an extended basis, they have probably witnessed the emotional, physical, and financial burden that an LTC situation can have on a family. Most likely, your client doesn’t want those burdens to fall on their own family.
How Will Your Client Pay For Care?

Is your client aware that long-term care insurance policies pay for personal care services that are not covered by health insurance, Medicare, HMOs, and even Medi-Cal in some cases? Long-term care insurance policies pay for care at home, in an assisted living community, in a skilled nursing facility and in an adult day care setting. Long-term care insurance policies fill the gaping holes found in plans that most people assume will pay for their personal care services, when, in fact, those plans don’t pay for personal care services. Long-term care insurance companies pay for these types of claims. Long-term care insurance also provides an avenue that prevents your client’s income stream and retirement savings from being diminished and protects your client from having to liquidate assets. q
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Gene Tapper, MS, LNHA, is president of Americal Advanced Insurance Solutions (AAIS), an agency that specializes in long-term care insurance strategies. America is a member company of the Americorp Financial Group. Tapper is also a board member with the National LTC Network and AAIS is a corporate Partner with the Los Angeles Chapter of the Financial Planning Association. Tapper has been an administrator of long-term care facilities, is an active long-term care insurance broker and has been a 15 year California Department of Insurance continuing education instructor for long-term care insurance. He has consulted in Argentina regarding the development of a long-term care insurance program that is currently being sold. Tapper can be reached at 866-311-2656 ext 169, www.LTC411.com, or gtapper@americalltc.com.

Life Settlements–Fractional Life Settlement Shares – A Unique and Growing Investment Opportunity

by Ken Morris

In 1911, U.S. Supreme Court Case Grigsby vs. Russell (222 U.S. 149) laid the groundwork for today’s life settlement industry. In this case, a life insurance company refused to pay death benefit proceeds on the grounds that the policy had been sold to a third party who had no insurable interest in the insured. Upon hearing arguments from both sides, Justice Oliver Wendell Holmes read the opinion of the court. The Court ruled in favor of the new owner and made it law that anyone who owns a life insurance policy has the right to do the following:

• Sell the policy to a third party.

• Change the beneficiary designation.

• Borrow against the policy.

• Assign the policy as -collateral for a loan.

The issue didn’t surface again until the early 1980s when AIDS became a national epidemic in the United States. People living with AIDS sought cash from their life insurance policies to help pay for ongoing medical treatment. Unfortunately for these AIDS patients, the cash-surrender values offered by insurance companies did not compensate them for the fair market value of their policies.

Viatical companies began to surface in response to this crisis to help AIDS patients liquidate their policies. The seller (viator) received a lump sum payout from the sale of their policy, allowing them to put their financial affairs in order and to live their remaining days with dignity.

Over the next several years, medical advancements were made in the fight against the AIDS virus. Protease inhibitors and cocktail drugs were found to be successful in prolonging the life of AIDS patients. For viatical investors, the certainty of death turned out to be an uncertainty. Investors who purchased policies on AIDS patients soon turned away from this strategy and started to purchase life policies on seniors instead.

This led to the emergence of the life settlement industry as an extension of the viatical industry. Life settlements and viaticals both involve the transfer of an existing life policy in which the insured has a projected life expectancy of up to 10 years. However, while viaticals focused on individuals with life expectancies of three years or less, life settlements focused on seniors who were over age 65 with life expectancies between two and 10 years. In addition, viaticals typically targeted policy sizes of $300,000 or less where life settlements targeted policies between $500,000 and $10 million.

This new segment of the secondary life market increased the number of policyholders who could potentially sell their policies. In 1997, it was estimated that there was $492 billion of in-force life insurance on seniors in the U.S. As the secondary market started to heat up, more and more financial advisors and insurance agents found this to be a win/win scenario for their senior clients who could now sell their policy in the secondary market for up to five times their cash-surrender value.

In early 2000, this new “non-correlated” asset class garnered the attention of large institutional investors including Merrill Lynch, Morgan Stanley, BONY, Credit Suisse, Deutsche Bank, and HSBC. Warren Buffett’s Berkshire Hathaway also got involved in this lucrative asset class.

Since then, life settlements have blossomed into a multi-billion dollar per year industry. According to Erich Sippel and Co. and Conning Research & Consulting, Inc., the industry grew from $200 million in policy purchases in 1998 to a total of $1.3 billion in 2001. By the end of 2011, life settlement transactions totaled more than $19 billion.

Bernstein Research predicts the industry could reach $160 billion by 2030. More accurate life expectancy calculations, more transparency in life settlement acquisitions, and more state and government regulation are expected to drive growth in the industry.

Another driving force is the Baby Boomer generation. As of January 2011, about 10,000 Baby Boomers per day turned 65 in the U.S. It is estimated that this wave will continue for the next 17 years.

The future growth of this asset class has inspired alternative asset management companies to create and design programs allowing individuals to take part in the ownership of life policies. These are called “fractional life settlements” or “life shares.”

Fractional ownership in life settlements is a unique investment opportunity for a qualified investor. When structured correctly, life settlements have the potential to outperform most other leading investments. In these tough economic times, investors, both young and old, are searching for ways to mitigate risk and still have the potential to earn equity-like returns.

The benefits of buying fractional shares as opposed to a single life policy are numerous. Since costs are split among multiple parties, clients do not have to take on the full responsibility of premium payments. Small investors can invest less than the capital -normally required to purchase entire policies. Clients in fractional shares can also diversify across multiple policies as opposed to committing capital to just one.

Life shares can help qualified clients diversify their investment portfolios with the potential for robust returns and no correlation to financial markets. Independent agents typically make a generous commission, often earning a mid-to-high six-figure income.

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Ken Morris is director of New Business as well as Sales and Marketing for Reliant Life Shares, LLC in Sherman Oaks, Calif. Reliant Life Shares is a fractional life settlement investment company. Reliant has created all of the necessary marketing tools that agents and advisors need to present this asset class to clients and prospects. Morris educates and recruits licensed life agents an RIAs.

Morris has been involved with the life settlement asset class for nearly 20 years, raising tens of millions of dollars on the private accredited investor side as well as on the institutional side. In the 1990s he created the first training course of its kind for this industry, “Viatical University.” Morris also started his own life settlement broker company in the 1990s as well as a large life settlement provider company in 2004, which ended up securing a $225 million line of credit with one of Germany’s largest banks.

Life Settlements Enter the Mainstream

by Stephen Terrell

The life settlement industry began more than 20 years ago — not as a new way to make money, but as a way to lift financial burden from those suffering from devastating illnesses. Since then, it has overcome a roller coaster ride of various twists, turns, ups, and downs. When the Great Recession struck, many observers prognosticated that the industry’s days were numbered. Fast forward to 2013, and nothing could be further from the truth. The industry continues to gain mainstream acceptance.

Last June, Congress established the U.S. Commission on Long-Term Care. Its mission is to evaluate and propose solutions for the nation’s long-term care crisis. The commission’s final report released earlier this year clearly states that life settlements offer a viable private sector solution to help stem the tide of overwhelming long-term care costs.

In the Commission’s detailed recommendation to Congress, it urged the government to “perform a well-designed analysis of private sources of funding for long-term care supports and services and encourage implementation to provide private capital support for long-term care.” The report goes on to suggest that policymakers “assess and expand, if possible, the conversion of life insurance policies to long-term care benefit plans.”

Texas just passed the country’s first Medicaid life settlement law. H.B. 2383 allows seniors with a life insurance policy that has a face value of $10,000 and above to pay for their long-term care through a life settlement. Before the law was passed, a life insurance policy was considered to be an asset and had to be surrendered prior to enrollment. This meant that someone who had been paying premiums for decades would have to surrender the policy for an extremely small portion of what it was actually worth. Many other states have already begun the process of introducing similar legislation.

Why are these changes happening? The reasons are simple. People are living longer than they did just a few decades ago — much longer. Between now and 2050, there will be a 900% increase in the number of people who reach 100, according to a 2011 report published by AARP. For the first time, by 2045, people 60 and over will outnumber those under 15. Our society is not economically structured to accommodate so many people who will need long-term care. Our society was formed within the context of generations who lived much shorter lives with far less expenses.

Many diseases and ailments that would have meant a death sentence a mere 10 years ago are now treatable. In terms of medical science, things are getting better. As a result, retirement savings are dwindling faster. But as people live longer, their reasons for owning life insurance also change. Life settlements are becoming a more widely known option. The lump-sum payment can be used to pay living expenses or buy a more appropriate insurance product.

Another consequence of extended living is that life insurance premiums eventually become too high to maintain. Since increased average life expectancies are factored into premium rates, it is inevitable for them to eventually reach a price level that can no longer be maintained. Instead of simply allowing the lapse of a policy for which they have paid to keep active for years, it makes far more financial sense for seniors to choose a life settlement and receive a windfall that they have helped accumulate over time.

The Medicaid crisis could be the biggest driver for years to come. States are running out of money as programs like Medicaid continue to be a major drain. State governments need creative solutions to solve the problem, and life settlements are one of them. The ability to gain access to life settlement dollars can save state coffers.

Soon, life settlements will be as ubiquitous as reverse mortgages, CDs, annuities, and other long-term financial tools. As our population ages, the need for life settlement products will expand as well. The prudent agent would be wise to jump on board and begin offering this product immediately to their clients who qualify.

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Stephen E. Terrell is senior vice president of Market Development and Branding of The Lifeline Program, a life settlement provider based in Atlanta, Ga. Terrell oversees all aspects of marketing including the P3 Program (Production – Performance – Profit) enabling agencies and agents to build a new market with life settlements, broadening revenue and increasing commissions. For more information, call 770-724-7300 or visit www.thelifeline.com or follow him on Twitter @LifelineProgram.

Self Funding–How the Affordable Care Act is Creating Opportunities for You and Your Self-Funded Clients

by David Zanze

With the Affordable Care Act (ACA) gearing up for implementation January 1, 2014, take a moment to consider the abundance of opportunities that the new health care law has created for brokers. Brokers have been nervous about what to expect from many of the new requirements, but the ACA is creating advantages for you and your clients, expanding offerings, promoting growth options, and helping your clients to save money, especially in the self-funded marketplace.

One of the significant requirements under the ACA is the mandate that large employers with 50 or more full-time equivalent employees provide health insurance to their workforce. Although the financial penalty has been delayed until January 1, 2015, this requirement had many brokers concerned about their book of business, and had many employers stopping to weigh their options — do I continue to offer my employees health benefits or do I prepare to take the tax penalty? It’s an interesting dilemma — one that has caused a lot of concern in the market since the ACA was enacted, but the good news is that recent studies demonstrate that employers that offer health benefits to their employees will continue to do so, particularly among employers who will be affected by the ACA requirements.

Ninety-four percent of employers will continue providing coverage in 2014 in an effort to retain and attract a stable workforce, according to a 2013 survey conducted by the International Foundation of Employee Benefits. In fact, there was a 23% increase number of employers who said they would continue providing coverage compared to the survey conducted in 2012. Offering a competitive health benefit package continues to be a top priority for employers because it provides a number of advantages — predominately helping attract talent, maintain employee satisfaction, and ensure retention.

Even better news is that we are seeing an increased interest in self-funded plans in the marketplace. Eighty-two percent of health-industry executives, surveyed by Munich Health North America, say that, over the past 12 months, they’ve seen growing interest among employers in self-funding their group health insurance plans, with one-third expressing a significant interest in self-funding. In the same study, 70% of health organizations expect to grow their self-funding portfolios in the coming year. Overall, the interest in self-funding is increasing as a direct result of the ACA.

Additionally, employers that choose to play by the rules established for the employer mandate have an obligation to offer all full-time equivalent employees the opportunity to enroll in coverage. Health plans that were once available only to management or salaried employees must now be offered to the balance of the workforce, thereby scaling up the employers count of employees and turning small groups into large groups. These large groups are excellent candidates for self-funded plans.

Self-funded employers will be subject to many of the same requirements of the ACA as will their fully-insured counterparts, such as lifting restrictions on lifetime and annual limits, waiting periods, and pre-existing condition limitations; and expanding dependent coverage for children up to the age of 26.

But self-funded employers are uniquely positioned to save money on plan design and cost containment. For example, narrow-network plan designs allow self-funded employers to share health costs with the provider community, allowing for deeper discounts. The plan design is less robust than a traditional PPO or EPO network, and is less expensive as a result. But it still meets the requirements of the ACA and provides comprehensive benefits to employees. Also, the self-funded employer has a say on which providers to contract with, creating a network that is tailored to their population, providing exclusivity and cost control that is not available in the fully-insured market.

The preventative services covered under ACA also present opportunity for you and your client. For one, it encourages your clients’ employees to take better care of their health and to see their physicians frequently for physicals and yearly exams, which helps mitigate risk and prevents higher claims costs for your client. It also gives you an opportunity to encourage other cost-containment options that demonstrate savings and help curb health expenses, such as wellness programs; health risk assessments; and disease and care management initiatives. Preventative care also helps reduce absenteeism, improve morale, and increase workplace productivity for your client.

And finally, the state and private exchange marketplaces that go into effect in 2014, as a result of ACA, provide even more opportunities for you and your clients to cover more lives. Some employers will inevitably choose to forego providing a health benefit package to their employees, but as a broker you can position yourself to help these fledgling employees find their way to the exchanges for coverage. The exchange marketplace also provides opportunities for you to enroll your clients’ part-time employees or families (spouses and dependents) who forego only dependent coverage, into the individual exchange, earning commission on every life you enroll.

Needless to say, the ACA offers profitable ways for you to grow your book of business. It also helps you provide affordable self-funded options to your large employers that mitigate employer risk, reduce costs, and promote a healthy population. q

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David Zanze has over 30 years experience serving as a leader and innovator in the healthcare industry. He joined Pinnacle Claims Management Inc. as president in 1996. Pinnacle Claims Management, Inc. (Pinnacle) is an all-inclusive health benefits third party administrator (TPA) that offers competitive, cost efficient claims management in tandem with the latest technology. Pinnacle administers benefits for a diverse range of small to large sized employer groups from all business sectors of the marketplace. In fact, Pinnacle was recently awarded the contract to administer the Small Business Health Options Program (SHOP) for the State of California Health Benefit Exchange. For more information call 866-930-7264 or visit www.pinnacletpa.com

Self Funding–ACA Rules –Which Ones Apply To Self-Funded Plans And Which Do Not

Mark Reynolds, RHU

The big day for the Affordable Care is nearing — January 1, 2014. Though there is still much unsettled about the ACA’s future and its impact many things are clear; one area of clarity is the advantage of ERISA-based, self-funded plans (e-based plans).

Brokers and employers need to know and will quickly learn that there are certain aspects of the ACA that do not apply to e-based health plans. In this article, we will discuss a few points that truly make e-based health plans employer driven and provide better benefits for covered members.

First A Little Bit About ERISA

ERISA refers to the law passed back in 1977 that allows single employers to self-fund their health plans. Prior to ERISA single employers could not legally self-fund their plans. ERISA is also the regulatory code that gives oversight of employer’s plans to the Dept. of Labor (DOL) and preempts state departments of insurance (DOI) from intervening in the employer’s plan. That is why you often hear the term “ERISA preemption” when discussing self-funded plans.

Also, it is important to remember that when we talk about self-funded or e-based health plans, we are not talking about the fully insured high-deductible plans (HDHPs) that implement HRAs or MERPs to lower cost and enrich benefits. These HDHPs with HRAs, which are so popular in California, have two parts. As you know, one part is the fully insured HDHP, which is regulated by the DOI and a second part, which is the HRA that is actually regulated by the DOL.

Advantage — Self-funded Plan

So, what ACA rules do and do not apply to self-funded plans? Let’s look at the rules that do not apply because they give employers the flexibility to make their plans as rich as desired while still controlling cost.

Medical Loss Ratio (MLR)

The ACA’s guidelines concerning a carrier’s MLR is one of the reasons employers are seeing premiums increase under the ACA, but the MLR rules do not apply to self-funded plans. The MLR rules push fully insured rates up due to the simple effect of mathematics so this is an advantage for employers that choose to self-fund their health plans.

Advantage — Self-funded Plan Three to One Rating Formulas

As you know the ACA dictates that the highest rate a fully insured carrier plan charges cannot be more than three times higher than the lowest rate it charges. This has been explained at every seminar or Webinar you have attended for the past three years so we all understand it. It will be painfully clear for our citizens to see the impact of this ACA provision as people transition to the new rating system in 2014.

E-based plans are not constrained by the three to one rule. First of all the actual premiums of E-based plans are always much lower because they are basically excess loss insurance that kicks in after the self-funded plan has paid a pre-determined amount (known as the specific deductible) but self-funded plans don’t have increasing effect of the 3:1 rule so this certainly gives employers an advantage in pricing for their self-funded plans.

Advantage — Self-funded Plans Geographical Rating Areas

The ACA, along with efforts by the California legislature, has divided the Golden state into 19 rating areas. Currently, carriers have only nine rating areas. This ACA provision can be argued both ways regarding the effect it has on fully insured plans, but the fact remains that this rule does not apply to self-funded plans.

That means that carriers providing self-funded plans can price their plans based on the widely accepted actuarial standards without the constraint of lines on a map. Self-funded plans put employers in the driver’s seat with regards to benefits, risk, and cost so avoiding arbitrary rating areas gives employers another advantage for self-funded plans.

Advantage – Self-funded Plans Essential Health Benefits (EHB)

This one can sound counter intuitive or at the very least confusing so stick with me for a moment. Self-funded plans are not required to provide the EHB as fully insured plans are required to provide. One’s first thought is “Well, that’s not fair.” But stick with me.

Self-funded plans are still required to meet minimum value just as fully insured plans are required. There is a calculator to determine the minimum value of health plans. Also, self-funded plans are required to pass the minimum value test in order to be deemed acceptable of qualified under the ACA.

The advantage for self-funded plans is that employers can make their plans as rich as they desire, but not waste premium dollars for benefits that people never use. Plus, if we look at the current market, every health plan you sell contains the 10 category of benefits outlined by the EHB so this provision is somewhat unnecessary and does add cost to fully insured plans again by the virtue of mathematics.

Advantage – Self-funded Plans. Traditional Advantages that continue under ACA

When considering which ACA rules do and do not apply to self-funded plans, we cannot leave out the traditional advantages that still exist. I will briefly identify a few of these.

Transparency and 24/7 Access To Data

Fully insured plans never give employers access to claims information, unit cost of health care cost, utilization frequency, Rx data, etc. etc. etc., but self-funded plans do. Employers can have access to their group’s data on a 24/7 basis if desired.

Plus, experience proves that, when given access to data, employers tend to make benefit richer not leaner, employers tend to lower member’s contributions not raise them, and renewals are reasonable and/or negotiable.

Wellness, Flexibility and Accountability

The ACA does require certain wellness benefits to be included as a part of the EHBs and for some flexibility for controls in obesity and smoking. These apply to self-funded plans as well. However, self-funded plans have much more flexibility and accountability when implementing creative benefits to encourage better health and wellness.

Along with the transparency of information discussed earlier, self-funded plans can create incentives for life style changes and actually monitor and account for improvements. In addition, the employer retains savings generated by actual life style improvements to pass along to employees in the form of better benefits or other rewards.

Advantage – Self-funded Plans Better Cost Management

If we are honest, we would agree that, over the past 10 years, employers and members have received little benefit as a result of their carrier’s fully insured plan cost management. I realize that the counter argument to this is that premiums would have risen faster or by greater amounts without cost management. One would have a difficult time proving to an employer that any containment of cost that carriers were able to achieve went to the employer’s benefit. It’s just human nature for the employer and employee to assume that since employer’s rates increased double digit, sometimes by 40% to 50% a year, that the carrier either did not control cost or somehow benefited by these increases.

Regardless of those arguments, the fact is that self-funded plans give employers a chance to control costs and review the data to determine if their efforts to control cost are working. Then the employer can make decisions for further controls as a result of its analysis. The employer truly sits in the driver’s seat with self-funded plans and that makes their plans employer driven for the benefit of the covered members.

Advantage – Self-Funded Which ACA Provisions Apply to Self-Funded Plans?

It is easy to start thinking that self-funded plans got a complete pass with regards to the ACA. Not so and here is a list of those provisions that to apply.

Unlimited Lifetime maximums

• Minimum Value (as stated earlier)

Cover Kids to age 26 *
• Specified Wellness and Preventive SBCs

• Mandatory Notices

90 Day waiting period (60 days in Calif.)

• 60 day notice of material change

Transitional Re-ins fee ($63/yr/member)

• PCORI fee

Sharing of all data with Feds in 2014

• No Pre-ex (except for Misrep)

Finally, it is easy to see why every employer will want their consultant to research self-funding as an alternative to the employer’s fully insured plan. While self-funding may not be right for every employer, every employer has the right to consider it and decide for themselves if it makes sense.

Our industry continually evolves to provide innovative solutions to market obstacles and the self-funded products available in the market today are a good example of that fact. Through employer driven self-funded products, employers can lower their costs, control costs in the future, provide the benefits their employees need without wasting precious dollars, implement effective life style changing wellness plans, and provide all of this with complete access to the data for analysis and plan design.

It’s a good time to consider the advantages that ERISA based self-funded plans provide to employers. q

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Mark Reynolds is a member of the Team at BEN-E-LECT whos employer driven health plan model provides MERPs, HRAs, and Self-funded plans to thousands of employers throughout California and the Western United States. He can be reached directly at 559-250-2000 or markr@benelect.com.