HEALTHCARE
• Exchanges Expected to Be a Big Draw For Some
• The Debate Over Limited Network Pharmacies
IN CALIFORNIA
• Commissioner Calls Blue Shield’s Rate Increase Unreasonable
NEW PRODUCTS & SERVICES
• Calculator Helps Show Real Cost of Accident and Illness
• Streamlining Life And Annuity Enrollment
• Dental Plans
• Life Insurance Tied To 10-Year Treasury Note
• Disability Insurance
• Online Video Training
• ACA Survival Guide
• Fixed Annuity Analysis Software
EVENTS
• Annuities & Taxes
FINANCIAL PLANNING
• Social Security Misconceptions Threaten Middle-Income Americans’ Financial
LIFE INSURANCE
• LIMRA: Life Sales Are Up Again
Exchanges Expected to Be a Big Draw For Some
Seventy-three percent of consumers with individual health insurance say they definitely or probably will shop for coverage using a state exchange, if available, according to a study by J.D. Power and Associates. In addition, 48% of health plan members (combining group and individual markets) are interested in using a state exchange. Group plan members who have a choice of health insurance brands are less interested in exchanges (36%) than are those who have no choice (50%). Income-eligible members with high out-of-pocket costs and less tenure with a health plan are most likely to try exchanges.
Fifty-nine percent of members in high-deductible health plans are interested in using exchanges compared 45% in low-deductible plans. Service quality may also play a role in shaping demand. Those with the most interest in switching to an exchange have contacted their health plan about a problem in the past year (60%) compared to 45% of those who have not had a problem. California plans with the highest membership satisfaction are Kaiser Foundation Health Plan and Blue Shield of California. The exchange also appeals to those working at small companies who want to take more control over their healthcare expenses. For more information, visit www.jdpower.com.
The Debate Over Limited Network Pharmacies
Multiple studies and white papers have come out recently arguing that allowing health plans to restrict members to limited pharmacy networks brings down costs. Opponents worry about taking away the consumers’ choice to visit their independent community pharmacy.
According to a white paper from the National Center for Policy Analysis (NCPA), unnecessary regulations against limited pharmacy networks will increase prescription drug costs. NCPA Senior Fellow Devon Herrick said, “Heightened regulatory scrutiny will prevent drug plans managers from holding down costs for consumers with programs such as creating exclusive networks and encouraging mail-order prescriptions.”
Herrick says that some states are enacting laws that restrict drug plans from offering lower prices for mail-order prescriptions in order to benefit local community pharmacies. Some drug plan sponsors use formularies to determine which drug therapies are appropriate and often discourage certain drugs or encourage generics. Dispensing fees are much higher for state-managed plans resulting in higher compensation to pharmacies, he said.
Independent pharmacies sued New York State to stop the state from steering Medicaid recipients to mail-order delivery of certain drugs, which the state Pharmacists Society claims violates patients’ rights and threatens neighborhood drugstores.
A study by Milliman finds that, for the limited pharmacy network to succeed, plan members must find it in their best interest to use the preferred outlets for their prescription drug needs. When a preferred pharmacy is geographically convenient for a member, it may be easy. In other cases, a member might object to shopping at a given pharmacy if others outside the network are more easily accessible or they prefer these pharmacies for some other reason. In the latter case, a plan will need to include a meaningful copay differential to change members’ behavior. The resulting copay differential may offset any enhanced discounts and actually increase plan costs. As a result, the large national chains may be poorly suited for a national limited-pharmacy network unless members have another choice, according to Milliman. The upside of having limited pharmacy networks will vary depending on the strength of existing pharmacy contracts. Larger PBMs have been more successful in negotiating strong contracts with national pharmacies without having to go the limited-network route, reducing their potential upside relative to smaller PBMs.
Seniors have serious concerns regarding mandatory mail order pharmacy requirements in prescription drug plans, according to a survey of 669 Medicare Part D beneficiaries by the National Community Pharmacists Association (NCPA). Sixty-three percent are fearful of losing access to the pharmacy of their choice if they are required to use mail order. Seniors also expressed concerns about using mail order pharmacies, including running out of their medications; not getting prescriptions in a timely manner; having their medications lost, stolen or damaged; and not being able to consult with a pharmacist whom they know and trust. For more information, visit www.ncpa.org, www.ncpanet.org, or Milliman.com.
Commissioner Calls Blue Shield’s Rate Increase Unreasonable
Insurance Commissioner Dave Jones says that the 11.7% average rate increase imposed by Blue Shield of California is unreasonable. The increase, effective March 1, 2013, affects about 268,000 Blue Shield individual health insurance policyholders. Department actuaries found that the average 12-month increase for individual members in all plans is 11.7% while the maximum 12-month increase reached 19.9% before changes associated with age, geography or family status occur. Blue Shield individual policyholders are experiencing an average increase as high as 20.5% over a 24-month period, he said. State actuaries say that Blue Shield’s 20.2% projected administrative costs are the highest among major carriers in the individual market. The core medical trend is 10.6%. Blue Shield added 2.3% to policyholders’ premiums to account for projected losses due to HIPAA/conversion plans. The Department determined this action to be unreasonable because projected losses from people who came out of the group market should not be shifted to and/or subsidized by the individual market. Blue Shield’s rate filing was submitted to the department on December 31, 2012.
The company issued the following statement:
Blue Shield of California’s Individual and Family Plan rates are reasonable. Here’s why:
• Our rate increases are lower than recent rate increases approved for most of our major competitors.
• Our premiums in the individual market are competitive with, and in some cases lower than, those of our competitors.
• These rates reflect the increases needed to keep pace with the medical costs for our members in 2013. Unfortunately, the cost of hospital and physician services, prescription drugs, and diagnostic tests continues to rise.
• Our rates meet the federal Medical Loss Ratio standard requiring 80% of premiums to be spent on medical care for our members. An independent actuary certified our rates as reasonable and meeting the MLR standard.
• Blue Shield has lost tens of millions of dollars in the individual market in recent years and we expect similar losses in 2013.
That said, we share the concerns of regulators and consumers about rising health insurance premiums. As a not-for-profit company whose mission is to provide access to quality, affordable coverage for all Californians, we are taking many actions to address rising medical costs, including collaborations with providers that improve quality while saving money for our customers. In addition, we limit our profits to two percent of revenue, returning anything above two percent to our customers and the community. Our 2% pledge assures our members that when we raise rates, it is not done to increase our profits.
Word & Brown General Agency to Conduct Healthcare Reform Seminars
Word & Brown General Agency is conducting seminars to help position health insurance brokers for success in the changing health insurance marketplace. The seminars have been designed in response to all of the regulatory changes that flow from the Affordable Care Act (ACA). Attending brokers will receive four hours of continuing education credits. Nearly 1,000 of California’s leading health insurance brokers are expected to attend these seminars. The following is the schedule of upcoming seminars:
Fresno (March 19)
San Jose (March 20)
Orange (March 26)
San Diego (March 28)
Riverside (April 5)
Glendale (April 9)
For more information or to register, visit www.wbcip.com.
Calculator Helps Show Real Cost of Accident and Illness
Aflac is offering an online tool that illustrates medical, household and out-of-pocket expenses for treatment of injuries and diseases. For more information, visit http://www.aflac.com/individuals/realcost.
Streamlining Enrollment
Andesa Services launched a Web-based tool to increase efficiency and accuracy of insurance enrollment and new business processing. The tool is integrated with the company’s secure, cloud-based illustration, policy administration and reporting solutions, allowing for automated support of the entire new business process from the point of entry of the census for illustrations to the actual issuance of policies. For more information, visit http://www.andesaservices.com.
Dental Plans
Assurant is offering dental plans that are designed to reduce out-of-pocket expenses. Family Share Max replaces traditional individual maximums. Families are placed in a shared dental coverage pool. The Preventive Max Waiver covers preventive treatments, such as exams, cleanings, and most x-rays. These services don’t count against maximum coverage limits. For more information, visit www.assurantemployeebenefits.com.
Life Insurance Tied to 10-Year Treasury Note
Lincoln Financial Group introduced “Lincoln Treasury Indexed Universal Life to capture the benefits of a potential rise in interest rates. It provides an affordable, baseline death benefit with the flexibility to customize coverage based on the performance of the 10-year Treasury yield. For more information, visit www.lfg.com.
Disability Insurance
A new disability insurance product from Standard Insurance Company allows brokers to reach a largely untapped market. “Protector Essential,” is an the individual disability income product for middle-income earners. The primary market includes individuals making $75,000 or less annually, including occupations, such as hairstylists, electricians or administrative assistants, and medical occupations such as physical therapists, dental hygienists and registered nurses. For more information, e-mail getinfo@standard.com or call 800-992-4446.
Online Video Training
The 360 Agent, LLC is offering an online video training series to help agency owners with some of the most prominent challenges they face in 2013. For more information, visit www.the360agent
ACA Survival Guide
Video Benefits Guy, LLC released the ACA Video Survival Guide to help benefit firms and employers navigate the Affordable Care Act. A series of online videos explain key ACA concepts in an engaging and easy to understand format. For more information, visit http://www.videobenefitsguy.com.
Fixed Annuity Analysis Software
Annuityratewatch.com expanded its fixed annuity analysis software to calculate the highest guaranteed lifetime income benefit (GLIB) for prospective annuitants. The user simply inputs the annuitant’s age, premium, state of residence, and the year they want retirement income to begin. The GLIB Calculator solves for the highest income payment. For more information, visit www.Annuityratewatch.com.
Annuities & Taxes
The National Assn. for Fixed Annuities (NAFA) is holding a Webinar examining key tax issues for annuities on Thursday, March 28 at 8:30 a.m. Pacific Time. For more information, visit www.gotomeeting.com/register/326887600.
Social Security Misconceptions Threaten Financial Security
A majority of retired middle-income Americans rely heavily on Social Security to fund their retirement, according to a study by Bankers Life. Seventy-two percent of middle income retirees say Social Security benefits make up at least half or more of their retirement income. The national average is 65%. In fact, 29% count on Social Security for 75% or more of their retirement income. Ten percent of those with household incomes $25,000 to $50,000 rely on Social Security for all of their retirement income.
Thirty-four percent do not understand that delaying the date they begin collecting Social Security benefits can increase their future benefit amount. Forty-seven percent believe incorrectly that an annual cost-of-living increase to their Social Security benefits is guaranteed and 36% believe incorrectly that full Social Security benefits start with their 65th birthday.
In addition to having gaps in understanding of benefits, some middle-income Americans are not paying attention to their Social Security statements. Thirty-five percent of middle-income Americans age 55 and older who are not yet receiving Social Security do not know what their monthly benefit amount will be when they retire.
For more information, visit Bankers.com.
LIMRA: Life Sales Are Up Again
New annualized premium for total individual life insurance grew 6% in 2012, which is the third consecutive year of growth, according to LIMRA’s fourth quarter 2012 individual life insurance sales survey.
Total individual life premium grew 12% in the fourth quarter — the largest growth recorded since the economic downturn. There was a 1% increase in the number of life insurance policies sold, making 2012 the second consecutive year of positive annual policy growth. The last time individual policy count increased two years in a row was in 1980 when it increased 3% and in 1981 when it increase 7%.
“We haven’t seen a quarter in which all of the major product lines experienced growth since 2006. Fourth quarter 2012 had a few driving forces, including the continued attraction to guarantees and growth potential, corporate sales, and the anticipation of product changes related to revisions to Actuarial Guideline 38,” said Ashley Durham, senior analyst, LIMRA Product Research.
Universal life (UL) new annualized premium had the strongest performance of all the products in the fourth quarter, rising 20%. Indexed UL improved 36% for the year. IUL now represents 30% of total UL premium, and 12% of all individual life insurance premium. While lifetime guaranteed UL premium jumped 27% in the fourth quarter, it was primarily a reflection of a fire sale before the new reserving requirements took effect on Jan. 1, 2013. Despite the substantial growth in the fourth quarter, lifetime GUL only increased one percent in 2012.
New annualized premium for whole life increased 7% for the year. This is the seventh consecutive year of growth for WL. In 2012, WL market share was 32 percent of total premium, which is the highest since 1998.
Term premium was flat for the year. However, LIMRA expects term sales to pick up as economic factors improve. Variable universal life (VUL) premium increased 16% in the fourth quarter of 2012, mainly due to sales of COLI and private placement. Despite the growth in the fourth quarter, VUL was unable to overcome the poor performance of the prior three quarters; so new premium was still flat in 2012. For more information, visit www.limra.com.
