HEALTHCARE
• Age Ratings Not Expected to Drive Up Costs for Younger Consumers
• Health Insurers Anticipate an Increase in Self-Funding
•Medicare Advantage Deductibles Fall for Plans
• CMS Boosts Medicare Advantage Reimbursement Rates
• CMS Offers Navigator Grants
• Republicans Introduce Pre-Existing Plan Bill
EMPLOYEE BENEFITS
• Older People Are Most Likely to Take 401(k) Loans
NEW PRODUCTS
• Absence Management App
• ACA Decision Support Tool
• Deferred Income Annuity
• ACA Resource Center
LIFE INSURANCE AND FINANCIAL PLANNING
• Consumers Procrastinate Buying Life Insurance
• Buying Life Insurance Retail
• Relationships Key to Success in the Rollover Market
CARRIER UPDATE
• ING U.S. To Rebrand As Voya Financial
Age Ratings Not Expected to Drive Up Costs for Younger Consumers
In 2014, the oldest health plan enrollees will not pay more than three times the premium of the youngest enrollees in the same region and with the same smoking status. Some industry analysts have warned that, as a result of this requirement under the Affordable Care Act (ACA), premiums for enrollees in their 20s will go up to subsidize the premiums of enrollees in their 50s and 60s. But a study by HealthPocket reveals that these fears are unfounded.
HealthPocket looked at premium data for individual and family health plans across the United States for nonsmoking men and women ages 23, 30, and 63. Premiums increased 260% for 63 year-olds versus 23 year-olds, which is well under the 300% limit imposed by the Affordable Care Act. The new age related premium limit is not likely to cause significant premium increases in most states. Two factors are more likely to raise monthly health insurance premiums than are age-based premium increase limits:
- Plans will need to offer more benefits to enrollees under the Affordable Care Act.
- Enrollees will include individuals with health conditions who previously could not get affordable coverage in the commercial market.
The prohibition of gender-based premium differences in 2014 may benefit elderly men. Premiums for 63-year-old nonsmoking men were 317% higher than for 23 year-old nonsmoking men. Premiums for 63 year-old nonsmoking women were only 203% higher than for 23 year-old nonsmoking women. However, the 23 year-old women started with higher premiums. This curious switch in the gender gap may be due to insurers associating higher healthcare costs to women between ages 19 and age 56. For more information, visit www.HealthPocket.com.
Health Insurers Anticipate an Increase in Self-Funding
Health insurance executives expect more U.S. employers to self-fund their group health insurance plans as a result of the Affordable Care Act, according to a survey by Munich Health North America. Eighty-two percent of executives say that employers are showing growing interest in self-funding. Thirty-two percent say that employer interest has increased significantly.
Richard Phillips, president of Munich Health North America’s Reinsurance Division said, “The trend towards self-funding stems from employers’ desire to maintain…flexibility and control in the design and financing of their employees’ health benefits. A properly designed self-funded health plan can allow a company to directly reap the benefits of their cost containment and wellness activities as opposed to having to pay a monthly premium based on an arbitrary set of rating restrictions. As companies struggle with the growing cost of providing quality benefits, we expect self-funding to continue to grow in popularity.”
Health insurance organizations expect to see growth in their self-funded or administrative services only (ASO) portfolios as a result of this trend. Sixty-nine percent of those surveyed plan on growing their self-funding or ASO portfolios over the next year. For more information, visit www.munichhealthna.com
Medicare Advantage Deductibles Fall
For the first time since inception of the Part D program, the deductible for the defined standard plan will be lower in 2014 than in previous years. Since enactment of the Affordable Care Act, Medicare Advantage enrollment is up by 25% while premiums have fallen. “Medicare Advantage will remain a strong option for beneficiaries under the policies,” said Jonathan Blum, CMS acting principal deputy administrator.” CMS announces the following:
• Lower Out-of-Pocket Drug Spending: The deductible and out-of-pocket limits for Part D will be lower in 2014. Beneficiary costs will be further reduced for Medicare enrollees who have reached the prescription drug coverage gap, or “donut hole.” In 2014, enrollees in the donut hole will get coverage and discounts of 52.5% on covered brand name drugs and coverage of 28% on covered generic drugs. To date, 6.3 million beneficiaries have saved $6.1 billion on prescription drugs.
• Greater Protection for Beneficiaries: Total beneficiary cost increases are limited to $34 per member, per month for 2014 (down from $36 per member per month in previous years). Part D plans will require their network pharmacies to get enrollee consent before each delivery, unless the enrollee personally requests the refill. CMS strongly encourages Part D plans to implement this consent requirement for the remainder of this year.
• Payments to Plans: The final estimate of the combined effect of the Medicare Advantage Growth percentage and the fee-for-service growth percentage is 3.3%. These growth rates assume a zero% change for the 2014 physician fee schedule by taking into account the likely Congressional override of the schedule physician payment reduction. Over the past year, the number of four and five star plans has increased significantly, with 127 such plans in Medicare Advantage in 2013, 21 more than the prior year. CMS is continuing to align Medicare Advantage benchmarks with Medicare fee-for-service costs and adjust for diagnostic coding differences among Medicare Advantage plans and Medicare fee-for-service providers.
• Improved Risk Adjustment Model: CMS will implement the proposed clinically revised risk adjustment model, which limits opportunities for Medicare Advantage plans to be paid more for better coding improvements. As a transitional step, the risk scores for 2014 will be a blend of those calculated under the 2014 and 2013 models.
• Improved Coordination of Care: In coordination with the Million Hearts initiative, plans are encouraged to improve access and adherence to anti-hypertensive medications by expanding their target enrollee populations for medication therapy management.
For more information, including the 2014 statutory updates to the annual parameters for the defined standard Part D prescription drug benefit, visit http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/index.html.
CMS Boosts Medicare Advantage Reimbursement Rates
CMS surprised insurers with a 3.4% increase in reimbursement rates instead of the 2.2% cut originally called for in February. The cuts would have left seniors and the disabled with far fewer coverage options to choose from, according to Stephen Pewter of www.Medicaresupplementalinsurancecomparison.net. Hesitant to provide lots of personal information on the existing sites he found, Pewter created his site, which requires just a zip code to deliver quotes from multiple providers.
CMS Offers Navigator Grants
CMS is offering grants to support navigators in Federally facilitated and State Partnership Marketplaces. The funding opportunity is open to eligible self-employed individuals and private and public entities applying to serve as navigators in states with a Federally facilitated or State Partnership Marketplace. The new funding opportunity provides up to $54 million in total funding and applications are due by June 7, 2013. To access the funding opportunity announcement, visit: http://www.grants.gov, and search for CFDA # 93.750.
Republicans Introduce Pre-Existing Plan Bill
House Republicans introduced a bill to shift additional funds into the Pre-Existing Conditions Insurance Plan to open it to new enrollees and extend funding through the end of the year. The Pre-Existing Conditions Insurance Plan was supposed to cover 375,000 enrollees. However, with only 110,000 enrolled, the administration was forced to close the program because of a lack of funds. The Helping Sick Americans Now Act would move funds from the Public Health and Prevention Fund into PCIP to keep the program open through the end of the calendar year.
H.R. 1549, The Helping Sick Americans Now Act, was introduced by Representatives Joe Pitts (PA) chairman of the Energy and Commerce Health Subcommittee, Michael Burgess, M.D. (TX), vice chair of the Health Subcommittee, and Ann Wagner (MO). Rep. Joe Pitts said, “Five weeks ago, House Republicans asked the President to move additional funds into the Pre-Existing Conditions Insurance Plan…Since the White House hasn’t answered our appeal, we’ve introduced legislation that would ensure that Americans with pre-existing conditions can once again have access to this program. “The Administration’s lack of a willingness to set sensible priorities has required us to introduce this legislation to provide immediate coverage for these individuals and ensure no American with a difficult medical diagnosis is told “tough luck” because the President failed to act,” said Rep. Burgess. “The legislation that will help dismantle the Public Health Slush Fund and help those with preexisting conditions get access to care through the high risk pools,” said Rep. Ann Wagner.
On April 3, the Health Subcommittee held a hearing to investigate the suspension of enrollment in PCIP. Susan Zurface, a 42-year old mother of two, testified about her struggle with leukemia and how being barred from the program has made it virtually impossible to get affordable health coverage. Testimony and video of this hearing is available here: http://energycommerce.house.gov/hearing/protecting-america%E2%80%99s-sick-and-chronically-ill
Older People Are Most Likely to Take 401(k) Loans
In the fourth quarter of 2012, 34% of participants who took out loans against a 401(k) were in 50s, 29% were in their 60s, and 27% were in their 40s, according to a Wells-Fargo study. Overall, there was a 28% increase in the number of people taking loans out from their 401(k)s. Average new loan balances increased 7% to $7,126 compared to 2011.
The increase among participants in their 50s was nearly double the increase among those under 30. “The increased loan activity, particularly among older participants, is concerning…The sandwich generation is caught between paying for their kids’ education and supporting elderly parents, which makes saving for retirement even more challenging,” said Laurie Nordquist, director of Wells Fargo Retirement.
In addition to the 2012 new loan activity, 19% of people with money in a 401(k) plan had at least one outstanding loan with an average balance of $7,764. For those under 30, the outstanding loan balance is 38% of their remaining untouched balance compared to 21% for those over 60. However, only about 9% of all participants under 30 have an outstanding loan, compared to almost 25% of participants in their 40s.
However, loans are not the biggest driver of leakage from retirement savings. A greater concern is that employees are cashing out their 401(k) when they leave an employer. Those dollars are often spent whereas with loans the funds are often repaid and stay in the retirement nest egg, said Nordquist.
Although loan activity is on the rise, people are contributing more to their 401(k) plans. In the fourth quarter, there was a slight decrease (1.8%) in participants deferring 3% or less and an increase in those contributing 10% or more (1.3%). Additional trends include the following:
• Significant numbers of participants who increased their deferral rates from 3% to 4% to 6%, were in their 20s and 30s.
• Most participants who increased rates from the 4% to 6% range to the 7% to 9% range were in their 30s.
• Participants over 50 increased rates from the 7% to 9% range to 10% or more.
• 25% of all 401(k) plan assets are now in managed investment options, up 4% from a year ago
• Despite this progress, almost 20% of those 65 and older have their entire balance in a single investment. More than 70% of those (or 14% of all participants over 65) have all their money in fixed-income investments.
For more information, visit https://www.wellsfargo.com
Absence Management App
Matrix Absence Management is offering an absence-management mobile app. Benefit administrators can view, manage, and analyze employee absence data from their Smartphone or tablet. A secure online portal features communication, reporting, and analysis capabilities for employees and administrators. For more information, visit www.matrixcos.com.
ACA Decision Support Tool
National Association of Health Underwriters (NAHU) has teamed up with Associated Benefits Consulting to offer members the ACA Decision Support Tool software. The goal is to help agents and brokers analyze how healthcare reform affects their clients. It allows gents and brokers to provide a customized analysis of the ACA’s impact on their client’s business, as well as a variety of scenarios and corresponding strategies. The application will be updated as regulations evolve. For more information, call 877- 291-9256.
Deferred Income Annuity
Principal Financial is offering a deferred income annuity for retirees who want to lock in a guaranteed income stream, but don’t need to start receiving it until later. It offers a flexible premium and the option to delay the start of income payments from 13 months to 30 years. Depending on the deferral period, the income payments could factor in a higher rate of return than what other fixed interest rate products offer. For more information, visit www.principal.com.
ACA Resource Center
United Benefit Advisors launched compliance solutions aimed at helping employers understand their obligations and opportunities under the Patient Protection and Affordable Care Act (PPACA). The PPACA Resource Center includes up-to-date information on the following:
- Counting of Employees
- Exchange eligibility/IRS Non-calendar-year plan
- Wellness Proposed Rules
- FSA and SBC Highlights
- W-2 Reporting Requirements
- Medicare Withholding Summary
- Essential Benefits/Actuarial Value
For more information, visit http://www.ubabenefits.com.
LIFE INSURANCE AND FINANCIAL PLANNING
Consumers Procrastinate Buying Life Insurance
Eighty-five percent of consumers, surveyed by LIMRA, understand the need for life insurance, yet just 62% have life insurance coverage. Eighty-five percent agree that most people need life insurance and 65 percent say they personally need it. “Life insurance has never been as inexpensive or easy to buy, especially with the anticipated growth of online and nontraditional purchasing channels, yet millions of consumers continue to put off the decision. Forty-five percent express some likelihood of purchasing life insurance in the next year. Insurance professionals and our industry play a critical role in helping to educate the public on the wide range of options available and should continue to work together to help people get the life insurance coverage they know they need,” said Marvin H. Feldman, CLU, ChFC, RFC, president and CEO of the LIFE Foundation. However, 33% of all consumers believe they do not have enough life insurance, including one quarter who currently owns a policy. For more information, visit www.limra.com.
Buying Life Insurance Retail
Seventeen percent of consumers are willing to purchase life insurance at a retail outlet, according to a study by LIMRA and the LIFE Foundation. Seven percent of consumers are willing to purchase at a superstore. Sixty-three percent of them expect costs to be reasonable, 44% expect the purchasing process to be simple; 43% expect convenience, 42% expect a no-pressure sales process. Todd A. Silverhart, Ph.D. of LIMRA said, “While the number of consumers willing to purchase a life product through a retail outlet is not overwhelming, it certainly is worthy of note. In light of the novelty of the concept and that few people have actually shopped for life insurance through a retail outlet, there is likely to be considerable confusion in the eyes of the consumer as to what such a purchasing experience might entail. For carriers seeking a niche market, retail ventures could be a worthy approach.”
Relationships Key to Success in the Rollover Market
Retirees who have a positive relationship with their plan provider are more likely to keep their assets with that provider, according to a LIMRA report. Matthew Drinkwater of LIMRA said, “Nearly 40% of participants…stay with their current plan provider…It’s important for plan service providers to proactively reach out to participants. Those who have strong relationships and satisfaction levels with their plan provider are more likely to stay with them.”
People are much more likely to stay with their plan provider after leaving their employer the provider contacts them. “An in-person visit or a phone call is more personal than an e-mail or direct mail and works better in building a positive relationship,” said Drinkwater. On the other hand, just because retirees keep assets in their plan doesn’t mean they’ll stay. Nearly half of retirees and pre-retirees have not decided whether to keep their money in their current plan. Many roll over assets with another company in order to consolidate all of their assets. For more information, visit www.limra.com.
ING U.S. To Rebrand As Voya Financial
ING U.S. has announced plans to rebrand as “Voya Financial.” Rodney O. Martin Jr., CEO of ING U.S. said, “Our vision is to help working Americans prepare for the important financial journey they face. We want to be known as the company that understands and supports their diverse needs as they seek to advance their retirement readiness…We intend for the Voya Financial brand to become synonymous with this goal as we provide the distinctive value, guidance, products and services our clients and partners have come to expect from ING U.S.”
Amsterdam-based parent, ING Group, has previously announced its base case plan to divest ING U.S. through an initial public offering (IPO). ING U.S. will start operational rebranding following the proposed IPO. The operational rebranding process is expected to take approximately 24 months once it is started, and ING U.S. would not use its new name and logo commercially until the operational rebranding process has been completed. The Voya Financial identity will be reflected in the company’s new ticker symbol (NYSE: VOYA) upon completion of the IPO. Until the rebranding is complete, ING U.S. will operate with its current “ING U.S.” name and brand assets.
