HEALTHCARE
Premiums Rise Modestly for Silver Plans
A report by the Robert Wood Johnson Foundation finds that premiums for the lowest-cost silver plans were modest, although there are exceptions in a few states. The same is true for the bulk of rating regions within these states. Large increases tend to be found in rating regions where the 2014 lowest-cost plan left the market, where the 2014 premiums were very low, and in areas without significant insurance market competition. In several cases, such circumstances caused very large increases in the lowest-cost available option in 2015.
On the other hand, premium options for the lowest-cost silver plan fell considerably in markets where new competitors entered or where an existing insurer was priced more competitively. Premium tax credits are tied to the second-lowest-cost silver plan in an individual’s rating area. People who want a more expensive plan must pay the full difference directly, and those who choose a less expensive plan reap the financial benefits.
Here are the numbers for California:
• Number of rating regions: 19
• Percent of population in rating regions with a decrease: 5.1%
• Percent of population in rating regions with a small increase (less than 5%): 57.3%
• Percent of population in rating regions with a moderate increase (5% to 10%): 33.1%
• Percent of population in rating regions with a large increase (more than 10%): 4.5%
• Number of rating regions where lowest-cost insurer changed: four
• Percent of population living where lowest-cost insurer changed: 9.6%
Premiums transparency, comparability of benefits, and actuarial values of plans spurs competition in the exchanges . However, many people must be willing to change plans, and insurers must be willing to take advantage of the lowest premiums. Without plan switching, competitive pressures on insurers will weaken.
In general, Blue Cross plans, which have been dominant in non-group insurance markets, have participated in the exchanges. But they frequently offer more limited network products than before 2014. In larger, particularly urban markets, other commercial plans participate in the marketplaces, and many have priced aggressively.
In 2014, many markets were joined by plans that previously enrolled only Medicaid beneficiaries and were thus structured to be low-cost plans. Co-ops, additional new entrants facilitated by the Affordable Care Act, were surprisingly successful in keeping rates competitive in several areas.
It’s uncertain whether the exchanges will continue to see aggressive pricing and small premium increases. First, the temporary risk corridors and reinsurance provisions in the law will end after 2016, which is expected to cause a small average increase in premiums. Second, it will be hard for insurers to avoid raising their premiums if underlying health care costs begin to grow at historical rates (as opposed to the lower rates seen in recent years). Finally, many insurers have been able to keep rates low with limited provider networks. If consumers prefer broader networks and are willing to pay for them, the market will respond by offering such products, and premiums will increase. States and the federal government could also engage in greater regulation of network adequacy, which could also cause premiums to increase. For more information, visit rwjf.org.
More Than 90 New Companies Created Since ACA Became Law
The ACA has opened the gates for savvy investors and start-ups to take a piece of the $2.9 trillion healthcare industry, according to a report from Price Waterhouse Coopers (PwC). The ACA is fueling these trends:
• New payment models reward outcomes and penalize poor performance, such as high rates of readmission and hospital-acquired conditions.
• New payment models and expansion of insurance coverage are making primary care once again the critical touch point.
• New entrants are rushing into the market to meet the demand for lower-cost, consumer-oriented care. More than 90 new companies have been created since 2010.
• Rapid enrollment in the ACA’s public exchanges has demonstrated the potential of retail-style health insurance, which has spawned renewed interest in private exchanges.
• States have emerged as key players in the reconfigured healthcare landscape as the ACA gave states notable discretion in how the law could be implemented.
Researchers say that industry leaders should watch closely as the reimbursement pendulum swings from fee-for-service to accountable care. They should also enhance consumer choice and engagement. To get the full report, visit pwc.com/US.
Pharma Industry Disputes Drug Spending Claims
Government data shows that retail prescription medicines will account for just 10% of U.S. health care spending through the next decade, according to a report by the Pharmaceutical Research and Manufacturers of America. The most recent national health spending projections show that pharmaceuticals are expected to grow at rates in line with overall health care spending through 2023. In fact, private insurers spent roughly as much on drugs as on administrative costs in 2013. The U.S. will spend $13.6 trillion on hospital care over the next decade, more than three times total spending on prescription medicines.
The year 2014 was unusual in that roughly 10 million of uninsured patients gained coverage, and a record number of new medicines were approved. Increases in health care costs were expected in 2014, given the expansion of insurance coverage under the Affordable Care Act. In addition, the FDA approved a record number of 41 new medicines; nearly 41% were first-in-class treatments, and more than 20% were personalized medicines.
The association says that a recent Express Scripts drug trend report only focuses on a small subset of medicines and excludes rebates from its calculations. While Express Scripts has claimed it will save the U.S. $4 billion annually as a result of its aggressive negotiations for hepatitis C medicines, it appears to exclude such savings in their public estimates of drug spending. However, public reports indicate that private payers are receiving discounts of up to 40% for hepatitis C medicines. In fact, published estimates of rebates paid by manufacturers put the total at $40 billion per year. In addition, a recent actuarial analysis of pharmacy benefit manager drug trend reports shows that trends for specialty medicines are frequently misleading, and often use inconsistent definitions and methods which can inflate and bias reported trends.
In addition, many medicines allow patients to avoid expensive hospital and long-term care. Every additional dollar spent on medicines for adherent patients with congestive heart failure, high blood pressure, diabetes, and high cholesterol generated $3 to $10 dollars in savings on emergency room visits and inpatient hospitalizations. For more information, visit catalyst.phrma.org.
The ACA May Reduce ER Visits (Slightly) but Doesn’t Affect Hospitalizations
Two patient groups created by the Affordable Care Act (ACA) had slightly fewer emergency department visits than before health care reform – Medicare patients enrolled in federally designated patient-centered medical homes and people under 26 who can remain on their parents’ health insurance. However, there was no change in the rate of the most expensive types of emergency visits: those that lead to hospitalization, according to a report by the American College of Emergency Physicians.
One study examined the rate of emergency department visits and hospitalizations for Medicare patients treated by patient-centered medical homes. (Primary care practices can receive special designation as patient-centered medical homes (PCMHs) from the National Committee for Quality Assurance.) From 2008 to 2010, outpatient emergency department visits grew slower for Medicare patients being treated by PCMH practices than by non-PCMH practices. The rate of growth per 100 PCMH beneficiaries was 13 visits fewer for 2009 and 12 visits fewer for 2010. There was no effect on rates of inpatient hospitalization.
The concept of medical homes has been around since the 1960s. Lead study author Jesse Pines, MD, MBA, FACEP said, “Our study shows that these models can have a positive effect on patients as far as limiting outpatient emergency department use, but they don’t seem to keep patients from being hospitalized, which is many times more expensive than ER visits.”
In a related study, the emergency department visit rate declined by 1.6 per 1,000 people among young adults (age 19 to 25) covered by their parents’ private insurance plans. The decrease was concentrated among women, weekday visits, non-emergency conditions, and conditions that could be treated outside the emergency department.
Lead study author Yaa Akosa Antwi, PhD said, “Reductions in ER use among young people were quite specific to less severe conditions that could be handled in a primary care setting, which is not unexpected. Overall, the reductions in ER use were modest, which suggests that even when the ACA is fully implemented, population-level changes in emergency department use may also be modest.” For more information, visit www.acep.org.
EMPLOYEE BENEFITS
A So-So Year for Most Multi-Employer Retirement Plans
A Milliman study reveals that multi-employer pension plans slipped slightly from an 81% funded status at the end of 2013 to an 80% funded status at the end of 2014. As was the case in 2013, many mature plans are still struggling to recover from the financial crisis. While the market value of assets for all multi-employer plans increased by $7 billion, the liability for accrued benefits outpaced these gains, growing by $12 billion and resulting in an increased shortfall of $5 billion.
“People assume that the stock market recovery would be enough to push these multi-employer plans back to where they were in 2007, but it’s not that simple. Liabilities have been growing at 7.5% per year on average, which complicates a full recovery,” said Kevin Campe, co-author of the MPFS.
About 15% of multi-employer pension plans were less than 65% funded as of December 31, 2014, and over half of the $117 billion aggregate shortfall for all multi-employer plans is attributable to these plans. On the positive side, about 22% of all multi-employer plans are over 100% funded. The recently enacted Multi-employer Pension Reform Act of 2014 provides new tools to the Trustees of the most severely underfunded multi-employer plans. To view the complete study, visit milliman.com/mpfs.
Job Seekers Focus on Benefits
The benefit plan is still a big draw for job seekers. Health insurance is, by far, the most important employee benefit to workers. Nearly 70% are satisfied with their health benefits while 12% would trade wages to get more health benefits, and 19% would surrender some health benefits for higher wages, according to a report by the Employee Benefit Research Institute and Greenwald & Associates.
Having a choice of health plans is important to workers. They want more choices, but most are confident that their employers or unions have selected the best available health plan. They are not as confident in their ability to choose the best plan if their employers or unions stopped offering coverage.
Employers say that they don’t plan to drop health coverage, which is considered a key employee benefit that’s highly valued by workers. But if a few large employers begin to drop coverage, others could follow suit. For more information, visit EBRI.org.
LIFE INSURANCE
Life Insurers Court Affluent Consumers
Life insurance and annuity companies are shifting course to respond to the growing affluent and high net worth consumer segments. Scott Hawkins, analyst at Conning said, “The increase in the numbers and wealth of affluent and high net worth Investors represents a global opportunity for the sale of insurance and investment products. Our analysis confirms that life insurers are competing for this opportunity by diversifying their products from protection into investment, and adjusting their traditional distribution to more effectively capture affluent and high net worth investors. This change in product mix to a greater reliance on annuities also lowers capital requirements, giving those firms an advantage in return on surplus.”
Steve Webersen, director of research at Conning said, “In our global review of the affluent and high net worth markets, insurers will need to differentiate their strategies to maximize their performance by market. For those pursuing developing and emerging markets with higher rates of growth, broadening distribution capabilities to capture more customers will likely be a key focus. Conversely, in mature and slower growth markets, such as North America and Europe, fighting for a greater share of the affluent or high net worth’s wallet will be more important. However, the high net worth and ultra-high net worth segments are truly global markets, which favors the large multinationals and changes the focus for many insurers.” For more information, visit conningresearch.com.
EVENTS
401(k) Summits
Guardian is hosting its third annual Retirement Solution 401(k) summit in more than 20 locations across the country. It will be held May 14 in Orange County and May 15 in the San Francisco Bay Area. For more information, visit GuardianLife.com.
Annuity Webcast
NAFA is featuring its Annuity Marketing Portal in a webcast
March 26 at 8:30 a.m. PT. For more information, visit nafa.com.
2015 LTC Insurance Sales Summit
The American Association for Long Term Care Insurance is holding its National Long Term Care Solutions Sales Summit October 27, 2015 in Washington D.C. For more information, visit aaltci.org/2015summit.
IN CALIFORNIA
Providers Arrested For Health Insurance Fraud
Steven Orenstein, 57, a marriage and family therapist, and Erin Kayem, 42, a licensed speech therapist, were arrested on multiple felony counts of health insurance fraud for allegedly billing Anthem Blue Cross for services amounting to $3.5 million that were never provided. Both providers have been charged with insurance fraud, conspiracy to commit grand theft, and grand theft.
Anthem Blue Cross investigators contacted the Department of Insurance for suspected provider fraud. Working with Anthem, department investigators found Steven Orenstein, owner of the Brain Enhancement Institute (BEI) and Erin Kayem, owner of Neurodevelopment Learning Institute (NLI), were billing for services not provided. Investigators discovered that two patients were for billed for multiple services that the therapists did not provide. In one case, a patient visited the facility for 12 sessions, but the insurance company was billed for 59 sessions. Another patient visited NLI for six sessions, and Anthem was billed for 74 sessions.
As out-of-network providers, Orenstein and Kayem, billed a total of $3.5 million and received nearly $1 million. Orenstein was booked at the inmate reception center in Los Angeles and Kayem was booked at Lynwood Sheriff’s Station. Bail for each is set at $350,000, and both face up to 65 years in prison if convicted on all felony counts. The case is being prosecuted by the Los Angeles County District Attorney’s Office.
Employee Benefit Conference
The American Law Institute is sponsoring a course on employee benefits on April 22 to 24 in San Francisco. It will cover insights and strategies for retirement, health, and executive compensation plans. For more information, visit ali-cle.org.
NEW PRODUCTS
Health Management Platform
Keas launched Health Hub, a Health Management platform for self-insured employers. It integrates over 50 health benefit offerings into a unified and engaging consumer experience for employees and an easy-to manage, integrated experience for employers. This platform eliminates administrative overhead for HR and Benefit departments, and drives utilization of existing health benefits. For more information, visit keas.com.
Critical Illness
Trustmark has launched a critical illness insurance product, “Trustmark Critical LifeEvents.” It offers the following:
• Preventive benefits
• Waiver of premiums during a critical illness without requiring a disability.
• Protection from other conditions not typically covered in a policy today, such as complications of diabetes and central nervous infections.
• A benefit when a policyholder is struggling to meet two or more activities of daily living (ADLs) because of a critical illness.
• More affordable options for conditions most likely to occur such as heart attack, cancer and stroke.
For more information, visit trustmarksolutions.com.
Online Consumer Dental Information Center
DentalPlans’ new Dental Information Center contains articles and videos addressing the most critical and common dental and oral health issues. Topics covered range from stained teeth, dry mouth, life with dentures, teething troubles, snoring, sleep apnea, and how to finance dental care. For more information, visit dentalplans.com.