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by Leila Morris
ANNUITIES
• Deferred Income Annuity Sales Break Records in 2012
IN CALIFORNIA
• Commissioner Offers His Own Geographic Rating Proposals
• Healthcare To Take a larger Share of California’s Budget
• Provider Sues After Being Excluded from Anthem Network
HEALTHCARE
• HHS Issues Final Rule on Essential Benefits
• The ACA Provides a Huge Expansion In Mental Health Benefits
• The Administrative Costs of Medicare Advantage Plans
• States Consider Requiring an RX for Allergy Meds
NEW PRODUCTS & SERVICES
• Retirement Savings Benchmarking Tool
• Tool kit For Choosing Employee Benefits
• Website Helps Policyholders with Complaints Against Insurance Companies
• Private Exchange Platform
• Helping Employees with 401(k) Rollovers
EMPLOYEE BENEFITS
• Voluntary Legal Plans Grow in Popularity
• How Gum Disease Treatment Lowers Medical Costs
Deferred Income Annuity Sales Break Records in 2012
As an emerging market, deferred-income annuities have seen significant growth in 2012, said Joe Montminy, assistant vice president and director of LIMRA annuity research. “We see new companies entering this market and existing players launching new products, targeting younger Boomers looking to create an income stream when they retire. LIMRA estimates that consumers age 45 to 59 have almost $10 trillion in financial assets so we anticipate these products will to continue to have remarkable growth.”
Deferred-income annuity sales topped $1.0 billion in 2012, according to LIMRA’s fourth quarter 2012 survey, which represents data from 95% of the market. Fourth quarter deferred-income annuity sales reached $390 million, which is almost 150% higher than sales in the first quarter ($160 million). However, they are still a very small part of the overall market, representing less than one percent of fourth quarter total annuity sales.
Total annuity sales were $52.6 billion in the fourth quarter, a decline of 8% from the previous year. Annuity sales dropped 8% for the year. Variable annuity sales totaled $147.4 billion in 2012, which was 7% lower than 2011.
Unlike historical trends, variable annuity sales did not follow equity market growth, which increased 13% in 2012, noted Montminy. Variable annuity sales were influenced by companies removing some products from the market, limiting additional contributions into existing contracts, and revising features/pricing on GLB riders.
Total fixed annuity sales fell 7% in the fourth quarter compared to the fourth quarter of 2011. For the year, fixed annuity sales dropped 11%, hitting a 12-year low.
In 2012, indexed annuity sales hit a record high of $33.9 billion — a 5% increase compared to sales in 2011. Indexed annuity sales grew slightly in the fourth quarter, reaching $8.5 billion, an increase of 2% over one year ago. However, this was 2% lower than third quarter sales.
Sales of indexed annuities have been buoyed by the growing interest of equity firms, like Apollo Global Management, Guggenheim Partners, and Harbinger Group, which have invested in companies selling these products.
Guaranteed lifetime withdraw benefit (GLWB) riders for indexed annuities continue to propel sales. A record 73% of consumers elected a GLWB rider, when available. LIMRA estimates that 87% of indexed annuities sold offer GLWB.
Fixed-rate deferred annuity sales (book value and market value adjusted) experienced another quarter of steep declines, down 20% in the fourth quarter and 27% for the year. Annual fixed-rate deferred product sales were $25.7 billion in 2012, the lowest level since 1998.
Book value sales declined 21% in the fourth quarter. Single premium immediate annuities (SPIAs) grew 5% in the fourth quarter. However, SPIA sales declined 5% in 2012 to $7.7 billion. For more information, visit www.limra.com.
Commissioner Offers His Own Geographic Rating Proposals
During a special legislative session, the Senate and Assembly health committees held hearings to examine health-reform bills ABX1-2 (Pan) and SBX1-2 (Hernandez). Insurance Commissioner Dave Jones says he is concerned that these bills, which contain six- or 13 geographic rating regions could increase health insurance rates dramatically. “It is critical that the Legislature amend these bills to avoid an increase of up to 23% on hundreds of thousands of Californians in 2014,” he said.
An analysis by the Insurance Commission reveals that maximum increases could be 22.6% for the Legislature’s proposed six-region plan and 25.1% for its 13-region plan. However, the insurance commissioner’s office created an 18-region plan, which Jones said would only increase rates by up to 8%.
Jones offers the following analysis:
Geographic Rating Region Proposals Comparison
Six-Region Proposal:
• Maximum increase of 23%;
• Average increase of 9.1%;
• Areas that would see the greatest rate shock include all Counties north of Kern including the foothills, Monterey, and all of Northern California except the Bay Area and the Central Valley (up to 19%); Bay Area (up to 23%); and Los Angeles (up to 22%).
13-Region Proposal:
• Maximum increase of 25.1%
• Average Increase of 4.0%
• Areas that would see the greatest rate shock include greater Sacramento (up to 22.2%); the Bay Area (up to 21.5%); and Los Angeles (up to 25.1%)
18-Region Proposal:
• Maximum increase of 8%
• Average increase of 3.5%
• Far Northern California (8%) (Butte, Del Norte, Humboldt, Lassen, Mendocino, Modoc, Nevada, Plumas, Shasta, Sierra, Siskiyou, & Trinity)
• Eastern Central Valley and Foothills (6.7%) (Calaveras, Tuolumne, Mariposa, Madera)
• Northern Sacramento Valley (6.7%) (Lake, Tehama, Yuba, Yolo, Colusa, Glenn, Sutter)
Healthcare To Take a larger Share of California’s Budget
On January 10, 2013, Governor Brown presented a balanced budget for the coming fiscal year, which will begin on July 1. No proposed budget had purported to be balanced since Governor Schwarzenegger’s 2007 to 2008 budget, which he presented in January 2007.
According to an analysis by California Common Sense, while some departments have seen their budgets shrink, the Department of Health Care Services (DHCS) costs have risen dramatically. As one of the largest departments in the state, spending on DHCS increased 62.2% between 2007 to 2008 and 2013 to 2014, rising from $17 billion to $27.6 billion.
Driving up the departments costs are nationally rising health care costs and increasing enrollment in Medi-CAL, which accounts for most of the departments budget.
The 2007 to 2008 proposed budget estimated a MediCAL caseload of 6.7 million enrollees while the proposed budget for 2013 to 2014 estimates 8.7 million enrollees, a 30% increase. That growth does not include an additional growth in enrollees that’s expected as a result of the enactment of the Affordable Care Act (ACA).
Combined with rising health care costs, increased Medi-Cal enrollment accounts for most of the programs additional costs to the state. The federal government matches DMHC’s funding for enrollees. For a temporary period, the federal government will fund a larger portion of costs arising from new enrollment under ACA.
The department’s $10.6 billion in additional state funding exceeds the state’s net spending increase by $2.8 billion, requiring other service areas to take cuts in order to maintain a balanced state budget.
Employee compensation and retirement benefit costs will also consume a much larger share of state spending in 2013 to 2014 compared to 2007 to 2008. Proposed annual salary spending has increased 15.5% among the executive, judicial, and legislative branches, though spending on legislative salaries has declined slightly.
Annual state contributions to retirement benefits – pensions and retiree health care – have increased $1.5 billion, or 24.8%. In particular, annual retiree health care payments have increased $682 billion and thus account for nearly half of the retirement cost growth. Furthermore, among annual retirement costs to the state, health care for retired employees and their beneficiaries grew the most at 61.2%. In comparison, annual pension contributions increased $790 million, or 16.4%.
Taken together, proposed annual spending on salary and retirement benefit costs increased $3.6 billion, an 18.4% increase since 2007 to 2008. That increase amounts to nearly half of the states $7.8 billion annual increase in spending across the budget. For more information, visit www.cacs.org.
Provider Sues After Being Excluded from Anthem Network
Jury selection began in a Los Angeles Superior Court case involving a claim that Anthem Blue Cross excludes primary care doctors from its Preferred Provider Network who advocate for patient care, resulting in less health care for its members.Dr. Jeffery Nordella claims that Anthem Blue Cross unlawfully excludes qualified doctors from its Preferred Provider Network. Because there is a shortage of primary care physicians in California, and LA County, Blue Cross exclusion of primary care doctors (such as Dr. Nordella) restricts its plan members’ ability to get healthcare, according to the lawsuit.
Anthem Blue Cross excluded Dr. Nordella – a primary care doctor – from its provider network even though he meets the company’s eligibility criteria, was a participating provider for Anthem Blue Cross for over 10 years, and accepts the terms of its contract. Dr. Nordella, a primary care doctor for 22 years, is the medical director of Porter Ranch Quality Care in California, which serves patients in the communities of Porter Ranch and Northridge. His patients represent the rich diversity of the region and the most fragile populations. Sixty-eight percent of the population is minority, 30% are children and 23% are the elderly.
HHS Issues Final Rule on Essential Benefits
The Dept. of Health and Human Services (HHS) issued a final rule that implements five key consumer protections from the Affordable Care Act:
• Guaranteed Availability – Nearly all health insurance companies offering coverage to individuals and employers must sell health insurance policies to all consumers. No one can be denied health insurance because of a current or previous illness.
• Fair Health Insurance Premiums – Health insurance companies that offer coverage to individuals and small employers will only be allowed to vary premiums based on age, tobacco use, family size, and geography. Factors that are no longer permitted in 2014 include health status, past insurance claims, gender, occupation, how long an individual has held a policy, or size of the small employer.
• Guaranteed Renewability – Health insurance companies will no longer be able to refuse to renew coverage because an individual or an employee has become sick.
• Single Risk Pool – Health insurance companies will no longer be able to charge higher premiums by moving higher-cost enrollees into separate risk pools. Insurers must maintain a single statewide risk pool for the individual market and single statewide risk pool for the small group market.
• Catastrophic Plans – Young adults and people for whom coverage would otherwise be unaffordable will have access to a catastrophic plan in the individual market. Catastrophic plans will generally have lower premiums, protect against high out-of-pocket costs, and cover recommended preventive services without cost sharing.
For more information visit: http://cciio.cms.gov/resources/factsheets/marketreforms-2-22-2013.html
America’s Health Insurance Plans (AHIP) issued a statement warning that the imposition of richer benefit packages will result in less affordable coverage for small employers, individuals and families by forcing them to buy up to coverage they may not want or need. AHIP noted that Jonathan Gruber, a prominent health economist and policy expert, says that a 10% rise in the cost of the Essential Health Benefits package would increase the federal government’s cost by 14.5%, or $67 billion, and reduce the rate of the insured by 4.5%, or 1.5 million, through 2019.
Many state departments of insurance and state exchange boards have begun requesting formal actuarial and economic forecasts of the effect of the ACA insurance reforms on their state. These independent studies have found that some provisions, including the Essential-Health Benefits and actuarial value requirements, will result in higher premiums.
AHIP is also concerned that the ACA requires the HHS Secretary to ensure that benefits under the Essential Health Benefits package be equal to what’s provided under a “typical employer plan.” While the term “typical employer plan” is not explicitly defined in the statute, it is vitally important for the benefit package be comparable to benefits purchased by small employers since small businesses and individuals will be the primary customers of exchange plan coverage.
AHIP notes that research has shown that workers and families who get health insurance coverage in the individual and small group markets are especially price sensitive. They tend to pay a larger share of the premium. A benefit package that’s modeled after coverage offered by very large employers would significantly increase premiums for small employers and families, thereby making coverage less affordable.
Under the ACA, most individuals will be required to have insurance at least equal to the “bronze” level of coverage. There is evidence to suggest that the minimum actuarial value of 60% may exceed the average value of a policy in a state’s market, particularly for individually purchased plans. For example, the non-partisan Congressional Budget Office (CBO) estimates that the average actuarial value of health insurance in the individual market ranges from 55%to 60%.
Also, researchers have found that the average actuarial value for non-group policies purchased in California was 55% (with a range of 32% to 85%. The California Healthcare Foundation has found that 62% of the 32 individual market plans available in Los Angeles County had actuarial values below the 60% minimum required under the ACA.
AHIP says that lowering the actuarial value for bronze coverage to 55% or 50% could help avoid disruptions in coverage and ensure that premiums stay affordable, especially for price-sensitive, younger individuals who get coverage in the non-group market. Also, policies that help ensure that younger, healthier subscribers remain in the marketplace can help promote a more stable risk pool and make coverage more affordable for everyone.
The ACA establishes limits on deductibles for health insurance plans in the small group market at $2,000 for individuals and $4,000 for families—effective January 1, 2014. In order to meet these new limits, many small group plans, particularly high-deductible/HSA plans, would have to lower deductibles substantially, thereby increasing the cost of coverage. By requiring many plans to lower deductibles, these caps could price many small employers out of the market and limit access to affordable coverage options for small business workers and their families. These caps could be especially problematic for small business employees who enroll in high-deductible/HSA plans—where the average deductible for single coverage ($2,814 in 2010) already exceeds the ACA limits. Eliminating these caps on deductibles can help ensure that affordable health insurance options are available to workers and their families and that small businesses can continue to offer coverage to their employees.
The ACA states that the HHS Secretary “may” include the amount of the annual employer HSA contributions toward the actuarial value calculation. However, in a bulletin issued in February 2012, HHS declared its intention to only include a portion of employer HSA contributions when determining actuarial value. AHIP says that including employer HSA contributions in the actuarial value calculation significantly increases the likelihood that HSA plans will be able to meet the minimum requirement and will help ensure that consumers continue to have access to high-quality, affordable coverage.
AHIP notes that total enrollment in HSA/HDHPs has grown to 13.5 million people (increasing by 2.2 million over the past year alone). Counting all employer contributions toward the HSA/HDHP actuarial value would help ensure that these affordable products remain available to businesses and their workers.
AHIP offers the following recommendations:
• Make the scope of the Essential Health Benefits comparable to the scope of benefits provided under a typical plan purchased by small businesses.
• Lower the minimum actuarial value for health insurance coverage under the ACA to ensure availability of affordable health insurance options and avoid disruptions in coverage.
• Eliminate caps on deductibles in the small group market to ensure affordability of coverage for small businesses and families.
• Require that all employer contributions toward employees’ health savings accounts (HSAs) are considered when determining a plan’s actuarial value.
For more information, visit www.ahip.org.
ACA Provides A Huge Expansion in Mental Health Benefits
The ACA will provide one of the largest expansions of mental health and substance use disorder coverage in a generation, according to a statement by the Dept. of Health and Human Services. Through the Affordable Care Act, 32.1 million Americans will gain access to mental health and/or substance use disorder benefits that comply with federal parity requirements. An additional 30.4 million Americans who have some mental health and substance abuse benefits will benefit from the federal parity protections. By building on the structure of the Mental Health Parity and Addiction Equity Act, the Affordable Care Act will extend federal parity protections to 62 million Americans.
All new small group and individual market plans must cover 10 Essential Health Benefit categories, including mental health and substance use disorder services. They must cover them at parity with medical and surgical benefits. Today, almost all large group plans and most small group plans include coverage for some mental health and substance use disorder services, but there are gaps in coverage and many people do not receive the benefit of federal parity protections.
About one-third of those who are covered in the individual market have no coverage for substance use disorder services and nearly 20% have no coverage for mental health services, including outpatient therapy visits and inpatient crisis intervention and stabilization. Even when individual market plans provide these benefits, the federal parity law does not apply to these plans.
About 95% of those with small group market coverage have substance abuse and mental health benefits. Many states have laws offering some parity protection, but most state parity laws are narrower than the federal parity requirement. In addition, 47.5 million Americans lack health insurance coverage altogether and 25% of uninsured adults have a mental health condition or substance use disorder.
The ACA expands coverage in three ways:
1. Includes mental health and substance use disorder benefits as Essential Health Benefits. About 3.9 million people covered in the individual market will gain mental health or substance use disorder coverage. Also, 1.2 million people in small group plans will receive mental health and substance use disorder benefits under the Affordable Care Act.
2. Applies federal parity protections to mental health and substance use disorder benefits in the individual and small group markets. Americans with non-grandfathered individual and small group plans will have mental health and substance use disorder coverage that is comparable to their general medical and surgical coverage.
3. Increases Access to Quality Health Care. The Affordable Care Act will expand insurance coverage to a projected 27 million previously uninsured Americans. Essential Health Benefits, including mental health and substance use disorder services subject to parity requirements, will be available to this newly covered population.
The Administrative Costs of Medicare Advantage Plans
Traditional Medicare’s administrative costs were only 1% in 2010, but that figure jumps to 6% if you include private insurers’ Medicare plans, according to a study in the June 2013 issue of the Journal of Health Politics, Policy and Law, written by Minneapolis-based researcher Kip Sullivan. The traditional Medicare program allocates only 1% of total spending to overhead compared to 6% when Medicare Advantage is included. The gap between the two measures has been growing over the past two decades along with rising enrollment in private Medicare plans.
Sullivan said, “What’s surprising is that the high administrative costs of the Medicare private insurance companies haven’t provoked a debate about whether spending more money on insurance industry overhead is a good use of scarce tax revenues.”
Sullivan says that the limited attention given to this issue is due partly to the confusion about Medicare’s overhead costs. “The large difference between traditional Medicare’s overhead and that of the insurance industry has caused some conservative critics of Medicare to assert that the federal government is ignoring numerous administrative expenditures incurred by various federal agencies that should be attributed to Medicare, he said. Sullivan notes that many liberals are also confused about Medicare’s overhead costs. “With so much confusion on both sides of the political spectrum, its fair to say a useful debate about whether to expand or contract the traditional Medicare program has yet to take place in this country,” he said. For more information, visit www.pnhp.org.
States Consider Requiring an RX for Allergy Meds
More than 18 million households in the United States depend on over-the-counter medicines containing pseudoephedrine (PSE), but some states are considering requiring prescriptions to make it harder for illegal meth makers to get their hands on PSE, according to a statement by the Asthma and Allergy Foundation of America (AAFA).
In recent years, policymakers, in a number of states, have proposed Rx-only laws that were defeated largely because patients and families opposed them overwhelmingly. In 2013 study by AAFA with Harris Interactive 62% of patients say are opposed to Rx-only restrictions. Survey results show that patients already face costs and burdens associated with treating their common symptoms:
- 64% are managing medications for two or more people in their household.
- Patient households deal with allergy symptoms for an average of more than two months per year.
- Only one-in-five patients can get in to see their doctor the same day, with 22% having to wait more than a week.
- Patients say that 42% of doctor visits require time off of work, with 31% saying that their doctor visits always take place during their work hours
- When including drive time, waiting-room time, and the visit itself, only one-in-five patients spends less than an hour visiting the doctor, with 30% requiring two or more hours per visit. Nine percent require three or more hours per visit
- 59% spend at least $20 per doctor visit, with 82% also paying to fill prescriptions frequently or occasionally for themselves or family members.
For more information, visit www.aafa.org/pse.
Retirement Savings Benchmarking Tool
ING U.S. is offering a Web-based financial benchmarking tool, “ING My Savings Score.” The easy-to-use self-service tool, available to the public at INGMySavingsScore.com, allows users to score their personal retirement preparedness by comparing their savings to a prescriptive target, based on age and annual income. For more information, visit INGMySavingsScore.com.
Tool kit For Choosing Employee Benefits
The National Business Coalition on Health (NBCH) and the Pacific Business Group on Health (PBGH) released the Choosing Wisely Employer Toolkit in collaboration with Consumer Reports. The Toolkit includes the following:
• Ready-to-use articles.
• Tip sheets from Consumer Reports.
• A PowerPoint presentation for use in meetings with employees.
• Sample campaigns, including a three-step guide to launching a Choosing Wisely campaign.
For more information, visit www.nbch.org.
Website Helps Policyholders with Complaints Against Insurance Companies
The new Website, InsuranceComplaint.com, compiles statistical data on insurance complaints while providing an open forum for people who want to share their claims experience and professional help. The data provided is compiled and used to initiate Market Conduct Surveys of carriers that demonstrate patterns of unfair claims practices. InsuranceComplaint.com founders Peter Nicolas and Michael Grady say they have first-hand experience with the frustrating issues policyholders can face during the claims process. Grady is an insurance professional with extensive experience adjusting claims. Peter is a policyholder who ran into a claims nightmare after a fire destroyed his home and possessions.
Private Exchange Platform
PlanSource launched MyPlanSource. The healthcare and benefit exchange software platform is designed to support defined contribution retail benefits marketplaces. It offers employer and employee shopping; personalized guidance on selecting a plan; and decision support. Defined contribution, enrollment, plan administration, billing, and data management are integrated in a single-carier or multi-carrier environment. It is designed for carriers, brokers, and other stakeholders looking to execute their own private exchange strategies. For more information, visit www.plansource.com.
Helping Employees with 401(k) Rollovers
RolloverSystems, LLC is offering personalized intervention that cuts cash outs and stranded accounts among job-changing participants, including those with low account balances who are at greatest risk of cashing out. For more information, visit www.RCH1.com.
Voluntary Legal Plans Grow in Popularity
A recent MetLife study reveals that interest in legal plans has been building steadily among employers and employees. Bill Brooks, CEO of Hyatt Legal Plans, notes that quality legal help costs only about $216 a year, which is less than some attorneys may bill per hour.
About two-thirds of employers that don’t offer a group legal plan say they would be open to adding it to their voluntary benefit portfolio. Some employers are concerned that a legal plan would add to their administrative burdens. However, 64% employers that have a group legal plan say that it’s is actually easier to administer this kind of plan compared to other voluntary benefits while 35% says it’s at least as easy to administer.
Some employers say they aren’t sure whether employees would be interested in the benefit. Yet, Hyatt Legal Plan’s own enrollment data reveals that nearly nine out of 10 employees re-enroll after the first year.
Employers prefer plans that cover a wide range of legal matters. The most frequently offered services are will preparation and estate planning; followed by family matters; home purchases and sales; and credit problems.
Employers say they offer group legal plans for the following reasons:
• 74% Help employees gain peace of mind when dealing with a legal issue.
• 69% Improve employee satisfaction.
• 68% Reduce employees’ stress.
• 62% Reduce the cost of legal services
• 58% Reduce time spent at work dealing with personal issues.
• 57% Provide above-average quality of legal services.
• 44% Increase retention and loyalty.
• 32% Compete with other companies’ benefit programs.
For more information, visit www.legalplans.com/eGuide.
How Gum Disease Treatment Lowers Medical Costs
When treated for gum diseases, medical costs are $2,956 lower for people with heart disease and $1,029 lower for people cerebrovascular disease (stroke), according to a recent study by United Concordia and Highmark Inc. Starting July 1, United Concordia will expand the diseases covered by its UCWellness dental program to include heart disease and stroke. UCWellness, available since March, is the first dental program to integrate a member engagement and education component, as well as 100 percent coverage for periodontal surgery benefits that members need to treat their disease. For more information, visit www.unitedconcordia.com.
