by Leila Morris – Employers took action on several fronts to hold down growth in the average per-employee cost of health benefits to 3.9% in 2014. While this was a bigger increase than last year’s historically low increase, it is still well below the 7% average rate of growth over the past 15 years, according to a survey by Mercer. Total health benefit cost averaged $11,204 per employee in 2014; this includes employer and employee contributions for medical, dental and other health benefits. Employers predict that in 2015 their health benefit cost per employee will rise 4.6%. This increase reflects changes they will make to reduce costs. If they made no changes to their plans, they estimate that cost would rise by an average of 7.1%.
Julio A. Portalatin, president and CEO of Mercer said, “Employers have done a remarkable job of holding down health cost growth for the past few years. But with enrollment almost certain to rise in 2015 as major ACA provisions go into effect, they’ll need to intensify their efforts. The strong interest they’re showing in private exchanges suggests that this new benefit delivery system is the innovation they have been waiting for.”
Helping to hold down cost growth in 2014 was the largest one-year increase in enrollment in high-deductible consumer-driven health plans (CDHP), from 18% to 23% of all covered employees. In addition, 3% of large employers (those with 500 or more employees) moved to a private exchange in 2014 (or for 2015) to provide benefits to their active employees and another 28% say they are likely to do so within the next five years.
Many employers expect to spend more in 2015 when the ACA requires them to extend coverage to employees working 30 or more hours per week. Thirty-eight percent are affected by this rule. While some have already taken steps to comply, the majority will do so in 2015. Employees who have chosen not to elect coverage in the past now have a stronger incentive to do so — as the minimum tax penalty for not getting coverage rises to $325 for 2015 from just $95 this year.
Employers of all sizes, but especially large employers, added consumer-directed health plans in 2014. CDHP offerings jumped from 39% to 48% among employers with 500 or more employees, and from 63% to 72% among jumbo employers. CDHP enrollment spiked from 18% to 23% of all covered employees while enrollment in HMOs fell to just 16%, which is the lowest level of enrollment seen since the survey began in 1993. Enrollment in traditional PPOs fell from 64% to 61%.
Many employers that did not already cover all employees working 30 or more hours said they would add a lower-cost plan for newly eligible workers, which may have helped fuel CDHP growth in 2014. The average cost of coverage in a CDHP paired with a tax-advantaged health savings account is 18% less than coverage in a PPO and 20% less than in an HMO: $8,789 per employee, compared to $10,664 for PPOs and $11,052 for HMOs.
Offering these plans is a top strategy for employers looking to avoid the “Cadillac tax” in 2018. The 40% excise tax on health coverage costs more than $10,200 for an individual or $27,500 for a family. Mercer estimates that about a third of employers are at risk for triggering the tax in 2018 if they make no changes to their most costly plan.
Mercer’s past five annual surveys have shown that employers remain committed to offering health coverage. In 2014 the number of employers that expect to drop their plans and send employees to the public exchange fell even further. Just 4% of all large employers say they are likely to terminate their employee health plans in the next five years, down from 6% in last year’s survey. And while small employers are still more likely to be considering an exit strategy, the number of those with 50 to 199 employees that say they are likely to drop their plans fell from 23% in 2013 to just 16% in 2014. For more information, visit www.mercer.com/ushealthplansurvey.
Many Americans Prefer High-Deductible Plans
More than four in 10 Americans prefer a high-deductible plan with a lower monthly premium, according to a Bankrate.com report. Millennials and people with household incomes of $30,000 to $49,999 are the most likely to prefer a high premium/low-deductible plan. Higher income Americans ($50,000 and up) and those 30 to 64 years are more likely to prefer a low premium/high-deductible plan. “While a low health insurance premium can be very attractive, you don’t want to make the mistake of focusing too much on your monthly payment. Especially for older Americans who may require more doctor visits than their younger counterparts, a low premium/high-deductible plan could actually cost more in the long run,” said Doug Whiteman, Bankrate.com insurance analyst.
Despite efforts by the Obama Administration to improve the health insurance exchanges, most Americans still dread shopping for their health insurance. In fact, 82% of Americans who recently shopped for health insurance say that it’s just as bad as or even worse than doing your own taxes.
The study also reveals the following about Americans:
- 32% say they feel more negative about the Affordable Care Act’s effect on their own health care compared to a year ago – more than twice as many as the 15% who feel more positive.
- 49% want major or minor changes to Obamacare; 26% want to repeal the law completely compared to 30% in June 2014; and only 16% want to keep the law as-is.
For more information, visit
http://www.bankrate.com/finance/insurance/health-insurance-poll-1114.aspx
Consumer Say Costs Are Rising While Access to Care is Dropping
The Affordable Care Act (ACA) has helped to boost the number of insured Americans to the highest levels since 2008. But a new survey from Radius Global Market Research (Radius GMR) shows that consmers are struggling to deal with having more costs shifted to them. As costs shift to consumers, patients are making fewer office visits, switching medicines more often, and using non-traditional offices for care, says Kathleen of Radius GMR. These changes are affecting doctors’ ability to have high quality relationships with their patients. Patients will need greater transparency to make decisions about their healthcare as they trade off healthcare with other household expenditures.
One in three Americans rank rising health care costs among their top-three concerns. Nearly half of all households experienced increased costs compared to the last year and more than half anticipate additional increases in the next six months. More than half of those who experienced increases in health care costs in the past year had increases to their premiums. Most households think they can do better in terms of premiums. Two-thirds of Americans covered via the Affordable Care Act (ACA) say they’ll change plans in 2015.
About one in four households are visiting their doctor less frequently and/or experiencing longer wait times at the doctor’s office. Twenty-four percent say it’s getting harder to get an appointment with the doctor. In lieu of a timely appointment, most patients are likely to self-medicate with OTC or herbs/alternative treatments.
One-third of those surveyed say had had problems with prescriptions not being covered by health insurance. In addition to having decreased access to name brand drugs, prescriptions are more likely to be switched to generics if they are available. One-fourth of prescriptions recently switched to generic. Within the past six months, one-third of chronic condition prescriptions were switched to generics. For more information, visit www.radius-global.com.
Many Are Unaware of ACA Penalties, Exemptions, and Tax Credits
Forty-eight percent of Americans don’t know that they have to report their health insurance status on their upcoming 2014 tax returns, according to the Intuit TurboTax Health Survey. Under the Affordable Care Act, 2015 will be the first year that Americans must prove they have qualifying insurance when filing 2014 taxes, or face a tax penalty. While 62% are aware that the uninsured will be required to pay a penalty, 87% do not realize that the deadline to avoid a tax penalty for 2014 has passed. Health insurance purchased during the current open enrollment period, which extends through Feb. 15, 2015, will apply to returns filed in April 2016.
Fifty-six percent of those without health insurance don’t know that uninsured individuals who meet certain criteria may qualify for an exemption from the Affordable Care Act tax penalty. Forty-five percent don’t know about the premium tax credits, which are designed to make health insurance less expensive for low-to-moderate income families. Free resources are available at TurboTaxHealth.com.
Gingrich Sees Potential for Bitter, Brutal Fight between GOP and White House
Republicans are weighing whether to get into the death grip of Obamacare or wait out President Obama’s term seeking specific, practical, doable reforms, according to Former House Speaker Newt Gingrich who spoke at a recent Academy of Managed Care Pharmacy forum in Washington, D.C, Gingrich says that Congressional Republicans will vote to repeal the ACA as a part of the budget reconciliation process.
Rather than starting a bitter, brutal fight over the Affordable Care Act (ACA), the GOP is likely to pursue specific, practical reforms that could gain large bipartisan support. However, he said, “If the U.S. Supreme Court strikes down federal subsidies for individuals living in states with federal exchanges, you will have chaos.” Faced with the growing cost of new, expensive medicines, the American people will eventually decide not to pay for marginally better ones, while continuing to pay for life-saving or life-changing medicines. The Republican capture of the Senate and multiple governors’ mansions continues to reverberate, not only on Capitol Hill and in state capitals, but also in executive suites of health care companies around the nation, said AMCP CEO Edith A. Rosato, RPh, IOM.
IN CALIFORNIA
Providers Help Promote Covered California
Covered California is teaming up with provider groups to boost enrolment in the exchange. The California Medical Association is one of 14 statewide health provider organizations that has begun sending letters and resource materials to to members encouraging them to promote open enrollment. Providers also get a sign to display in their offices informing patients that they accept insurance plan products offered through Covered California. The resource materials included with the letter are available here: www.CoveredCA.com/news/PDFs/2_County_Listing_of_carriers.pdf, www.CoveredCA.com/news/PDFs/Covered_California_Insurer_Contacts.pdf, www.CoveredCA.com/news/PDFs/office_placard.pdf and www.CoveredCA.com/news/PDFs/open_enrollment_one_sheet.pdf.
EPIC Ranked 20 among Top Large Group Brokers
EPIC Insurance Brokers and Consultants has been ranked number 20 among the nation’s top large group employee benefits consultants by Employee Benefit Advisor. As one of the fastest growing private insurance brokerage and employee benefits consulting firms based in the U.S., EPIC has been on an aggressive growth trajectory, competing against the largest, institutional brokers as well as smaller regional firms with a fast, flexible, client-focused business model. Headquartered in San Francisco, EPIC has nationwide presence across key lines of insurance, including commercial property and casualty, employee benefits, unique specialty program insurance, and private client services. Since its founding in 2007, EPIC has grown revenue from $5 million to $160 million through organic growth and strategic acquisitions, and remains a fixture on the insurance industry’s “Best Places to Work” lists. Its strategic partners include private equity firms The Carlyle Group and Stone Point Capital. To learn more, visit http://www.epicbrokers.com/ .
Alternative Medicine Provider Convicted of Fraud
Lisa Maria Henschel, 50, was convicted by a jury of 32 felony counts of insurance fraud in connection to $77,237 in bogus billings from Silverlake Hills Health Center. Patients got alternative medical care, such as chiropractic care, acupuncture, and Pilates that were not covered by insurance. Henschel altered billing codes to reflect expensive diagnostic codes that would typically be accepted by automated claim processing systems. Henschel also forged the signature of a doctor on the billing forms. The doctor was not connected to her business at the time. Even though she was traveling out of the country, Henschel listed herself as a patient of the health center. She then accumulated hundreds of invoices, for which many covered the same time period she fraudulently claimed she was in Los Angeles receiving treatment. Henschel got a sentence of two years in Los Angeles county jail and four years of probation.
Bill Would Provide Health Care Regardless of Immigration Status
Senator Ricardo Lara (D-Bell Gardens) introduced SB 4 – the Health for All Act of 2015, to expand access to health care coverage for all Californians, regardless of immigration status. The bill continues the Senator’s efforts to address the exclusion of undocumented Californians from the state’s health care exchange. The Affordable Care Act (ACA) excludes undocumented immigrants from the insurance coverage provided through Covered California. The President’s recent executive action on immigration could have a significant effect on the number of people in California without access to coverage. That’s because Californians that are granted deferred action and who meet income and other requirements are eligible to enroll in the state Medi-Cal program. “Although it’s no substitute for comprehensive immigration reform in Congress, President Obama’s action is a tremendous step forward for our immigrant community, but we’ll still have a significant population without access to affordable health care,” said Lara.
According to the Migration Policy Institute, an estimated 1.2 million Californians will be newly eligible for deferred action under the President’s reforms. Many of those who are eligible may not apply for relief due to the cost, fears of exposing themselves or other family members to government scrutiny, or a lack of information about the program. Others may already have health care coverage through an employer or private insurance. Accurate estimates of how many undocumented Californians will be eligible for Medi-Cal coverage are not yet available. The bill introduced in the State Senate declares the intent of the Legislature that all Californians, regardless of immigration status, have access to affordable health coverage and care. For more information, visit http://www.senate.ca.gov/lara
FINANCIAL PLANNING
Plan Sponsors List Their Top Priorities
Three quarters of plan sponsors say helping their employees save enough for retirement is one of the three most important factors in their retirement benefit strategy. Nearly four in 10 say it is the top factor, according to a LIMRA study. More than three fourths of the plan sponsors give their company’s plan a grade of A or B, but only 61% give their employees’ saving habits similar grades. Tools like auto-enrollment and auto-escalation can have a measurable effect on employee participation and savings rates, yet only a third of plan sponsors offer these features in their plans. These findings indicate opportunities for plan providers and advisors to help employers manage costs and leverage tools to help employee savings habits, she said. For more information, visit www.limra.com.
LIFE INSURANCE AND ANNUITIES
A Mixed Bag for Annuity Sales
U.S. annuity sales fell 2% from the prior year, according to a LIMRA study. Throughout the year, fixed annuities have been the primary driver of annuity growth. The 50 basis-point drop in interest rates since the start of the year has dampened interest in fixed products pulling down third quarter sales.
Total fixed annuity sales were down 5% compared to the prior year. Year-to-date, fixed annuity sales increased 21% from 2013. Sales of fixed-rate deferred annuities fell 32% compared to the prior year. Fixed-rate deferred annuities grew 8% over last year. Index annuity sales grew 15%. Year-to-date, indexed annuity sales grew 31%. The indexed annuity guaranteed living benefits (GLBs) election rate was 69% (when available) in the third quarter 2014. Deferred income annuity (deferred-income annuity) sales increased 21%. In the first nine months of 2014, deferred-income annuities jumped 35%. The top three writers account for 75% of deferred-income annuity sales in the third quarter.
Single premium immediate annuity sales were up 10% in the third quarter while SPIA sales jumped 30% to reach $7.4 billion. LIMRA predicts that SPIA sales will beat annual sales records. Variable annuity sales fell 1% in the third quarter. Year-to-date, variable annuities fell 3% from 2013. Many of the top variable annuity sellers are focusing on diversifying their variable annuity GLB business. In the second quarter, a few of the top companies entered the market with accumulation focused product without a GLB rider. Election rates for variable annuity GLB riders, when available, were 76% in the third quarter of 2014. For more information, visit limra.com.
Most Workplace Life Insurance Customers Are Gen X or Y
Seventy-five percent of workplace life insurance customers belong to Generations X or Y, according to a recent LIMRA study. Ron Neyer of LIMRA said, “Younger, less experienced buyers typically don’t have financial advisors, so they tend to look to different information sources compared to older customers. Workplace life insurance buyers are also more likely to be first-time customers of individual life insurance, and about a quarter have never had a general discussion with someone who represents the industry.”
While there are differences between these customers and those who buy outside of the workplace, the majority live in households with annual incomes of over $50,000.
Workplace customers are more often single and don’t do a whole lot of shopping around after being presented with an option at work. In fact, 62% consider only one offer, and only one in six explores a third option. Many rely on their employers’ expertise for carrier selection.
Workplace customers place more emphasis on income replacement compared to customers who use other distribution channels. More than 70% of workplace customers say they are comfortable with their buying process. Electronic enrollment platforms have significantly increased at the worksite over the past 10 years. Thirty-six percent of workplace customers apply online or via e-mail. For more information, visit www.limra.com.
LIFE SETTLEMENTS
Why Consumers Need to Know about Life Settlements
In the wake of the 2012 tax law that raised the estate tax exemption, many senior consumers are left with policies they had purchased for estate tax liquidity when the exemption threshold was much lower. Abacus Life Settlements issued a statement calling for greater consumer awareness of the options for seniors who no longer need life insurance policies purchased for federal estate tax purposes. Due to the passage of the 2012 American Taxpayer Relief Act (ATRA), in 2015 estates valued at or below $5.34 million per person (or $10.68 million per couple), will pass to heirs federal-estate-tax-free. As a result, larger life insurance policies may become unnecessary, and many senior policy owners are left wondering what they should do with their sizable life insurance policies. Seniors living in approximately 20 states with inheritance tax liability, may need some form of life insurance coverage, but with a much lower death benefit amount.
Citing previous studies of high lapse rates for many life insurance policies, Abacus cautions against allowing these unwanted policies to lapse or accepting low cash surrender values when there are better options. A study by Princeton reveals that 76% of universal life policies sold to seniors at age 65 never pay a claim. Also, a study by Milliman reveals that 88% of all universal life policies don’t terminate with a death benefit claim. Abacus is urging life insurance advisors and estate planners to inform senior clients of all the options available for policies that no longer serve their original purpose. During annual review meetings, agents and tax advisors are encouraged to explore with the client all possible solutions to optimize their unwanted insurance asset. For more information, Visit https://abacuslifesettlements.com.
WEBINARS
Agents Give Their Best Tips on Selling Medicare Supplement Plans
The first online live broadcast from the National Medicare Supplement Insurance Sales Summit can be seen free of charge. A dozen of the nation’s top Medicare supplement insurance agents will present their strategies for finding prospects, conducting seminars, converting leads to appointments and selling policies. Four hours of programming will be streamed live from the conference taking place in Orlando on April 14th. While access is completely complimentary, pre-registration is required to get website access. For program details or to sign-up, go to: www.insuranceexpos.com.
Fixed Annuity Webinar
With the November elections now history, join NAFA President & CEO, Kim O’Brien, to learn how the results affect the fixed annuity industry, the insurance industry as a whole and your business! The webinar, “Election Outcomes – What It Means for Your Business,” will be held Thursday, December 18 9:30 a.m. PT. For more information, visit www.nafa.com.
NEW PRODUCTS
Fixed Index Annuity with Lifetime Income Rider
Genworth introduced a fixed index annuity with a lifetime income rider for consumers as young as 45 who want to start building retirement income that is protected from market losses and has the potential to grow before and after withdrawals begin. The SecureLiving Growth+ with IncomeChoice rider can help consumers save for retirement while being protected from market losses. It offers more growth potential than existing interest rates, and guaranteed lifetime income that can keep growing. It also offers the potential to double their income for up to five consecutive years if the owner is confined to a medical care facility. It is the only fixed index annuity on the market that provides access to caregiver support advocates who can help answer care-related questions, access care and help identify potential care facilities. For more information, visit https://www.genworth.com/contact-us.html or call 888-436-9678.
Life Insurance Field Underwriting Tool
MetLife launched its individual life insurance field underwriting tool to help financial professionals improve their clients’ service experience. MetLife QuickPredict estimates a client’s likely rating class in a simple-to-use on line format – viewable on computer, tablet, or smartphone – allowing financial professionals to provide more accurate policy premium estimates. For more information, visit www.metlife.com.
