Employer-based healthcare plans are in a state of flux following this year’s implementation of the Affordable Care Act (ACA). Since health care costs in retirement have long been considered a major source of financial stress, changes to coverage are affecting how Americans tackle retirement planning, according to an analysis by Mike Flower and Brad Bofford, managing partners of Financial Principles, LLC in Fairfield, NJ. Until recently, most of the focus of the ACA has been on coverage for the previously uninsured or of those covered through individual health plans. But the conversation is shifting toward how insurance exchanges are affecting employer-based group plans. While information on enrollment and coverage changes will not be available for some time. Principles, LLC has worked with several small businesses that have switched their healthcare coverage this year from group pricing to individual pricing. Traditionally, employees would choose from price-fixed categories such as, married with children, married couple, single parent with children, and single person. By moving to individual pricing, coverage is based on the age of the employee, spouse, and each child — maxing out at three children. What is surprising is the time and effort that are now going into collecting the data needed to administer these plans before and after enrollment since every employee is paying a different price.
Some insurance companies are increasing their premiums in order to move employees out of the top-of-the-line Cadillac plans. It forces employers to accept lesser service plans for the same price as what was paid for the Cadillac just two years ago. Increased deductibles, higher co-pays, and more restricted pharmacy benefits are just a few examples of how these changes to employer-base plans are shifting more and more costs to employees. Employees are forced to allocate more of their own money on health and less on retirement vehicles. The authors says that the market trend is moving toward more consumer responsibility and less employer control. The analysis advises employees to ask their employers following:
1. Will there be bigger paycheck deductions for employee and/or dependent coverage?
2. Are there plans to move employees into a private insurance exchange? If so, will it be within a defined contribution framework?
3. Will part-time workers continue to receive coverage?
Employees are also advised to do the following:
1. Consider a high deductible health plan with an HSA, and research the federal or state exchanges.
2. While it’s tempting to reallocate money otherwise put into retirement accounts to pay for increasing healthcare costs, don’t do it. Look for other ways to cut back on spending and keep saving to ensure you have enough money to last through your entire retirement years.
3. Work with an independent financial advisor.
For more information, visit www.financialprinciples.com.
ACA Hits Health Insurers in the First-Quarter
Many health insurers’ first-quarter 2014 results were hurt by that fact that their income statement now includes the annual industry fee assessed under the Affordable Care Act (ACA), according to Best. The fee begins at $8 billion in 2014 and increases gradually until reaching $14.3 billion in 2018. Beginning in 2014, health insurance issuers pay an annual fee based on net written premiums. The fee is imposed on health insurers depending on the amount of the issuer’s net written premium. The Insurer Fee applies broadly to most forms of health insurance. Many insurers have increased premiums to offset the fee. The American Action Forum estimates that the fee will result in premium increases for the average insured individual of $60 to $160 per person in 2014 and $260 for the average family. The National Association of Insurance Commissioners requires health insurers to expense the 2014 fee, which will be paid in September, in the first-quarter statutory statements rather than accruing the fee quarterly. For more information, visit http://www3.ambest.com/bestweek/purchase.asp?record_code=227625 .
Addressing Growing Cost of Diabetes
As diabetes cases increase worldwide, curbing the personal and financial toll will become a high priority, according to the American Academy of Actuaries. Diabetes is expected to become more common globally, increasing from 8.3% prevalence in adults in 2011, to 9.9% in 2030, according to data from the International Diabetes Federation. At the same time, spending on diabetes varies widely. In 2010, the United States spent $197.8 billion, accounting for 53% of global spending on diabetes, whereas India, with the largest population of diabetics, spent $2.8 billion, less than 1% of the global total. An issue brief developed by the Academy examines the projected future global prevalence and costs associated with diabetes. It also examines efforts in seven different countries (Australia, Canada, Israel, Singapore, South Africa, the United Kingdom, and the United States) to develop better ways to measure, prevent, treat, and slow the cost of, the disease. The results are cautionary yet hopeful. For more information, visit http://goo.gl/P9v5SC.
Medicaid Patients Use, Not Abuse Emergency Rooms
Medicaid enrollees visit the emergency department appropriately like most patients, but have more complex health needs and less access to primary care, according to a report from the Medicaid and CHIP Payment and Access Commission (MACPAC). Non-urgent visits accounted for just 10% of Medicaid visits to the ER, which is very close to that of the general population – about 8%. Most have serious and complex medical problems that can only be addressed in the emergency department. Given Medicaid’s historically low reimbursement rates, the shortage of primary care physicians accepting these patients isn’t surprising. The lack of access to primary care is even more acute for Medicaid patients with disabilities who are disproportionately represented on Medicaid rolls. Alex Rosenau, DO, FACEP, president of the American College of Emergency Physicians said, “The lack of access to primary care certainly contributes to Medicaid patients’ use of the ER, but for Medicaid patients with serious mental illness, multiple illnesses and homelessness, even having a primary care physician is no bar against appropriate emergency department use. In general, the combination of poverty and illness present challenges with few genuinely simple solutions, despite misplaced beliefs that significant health care costs could be saved by keeping patients out of the ER. Efforts by various states to deny payment for Medicaid visits to emergency departments are dangerous and wrong.” For more information, visit www.acep.org.
EMPLOYEE BENEFITS
Life Insurance Accounts for Almost Half of Inforce Voluntary Premium
Life insurance has the largest share of inforce voluntary premium with term and UL/WL accounting for 47%, according to a report by Eastbridge Consulting. Term insurance accounts for 37% of inforce premium based on the carriers reporting. Disability (STD and LTD) was a distant second at 17% of inforce premium, and dental insurance was third at 16%. There were a few interesting differences in sales by product compared to the mix of inforce. Some of this reflects the typical persistency of the line (e.g.: life persists better than accident). The following shows the mix of sales and inforce by line of business:
| Line of Business | Mix of Sales | Mix of Inforce |
| Term | 37% | 22% |
| Dental | 16% | 13% |
| UL/WL | 10% | 7% |
| STD | 9% | 14% |
| LTD | 8% | 7% |
| Accident | 3% | 12% |
| Hospital Indemnity/ Supplemental Medical | 2% | 8% |
| Cancer | 2% | 5% |
| Vision | 2% | 5% |
| Critical Illness | 2% | 5% |
| Other | 3% | 2% |
For more information, visit www.eastbridge.com.
VOLUNTARY BENEFITS
Brokers Are Selling More Voluntary, but Use of Private Exchanges and Defined Contribution Is Limited
Most brokers say that the Affordable Care Act has caused them to sell more voluntary benefits, according to a joint survey from Benefits Selling and Eastbridge Consulting Group. In fact, 60% of the brokers surveyed are selling more voluntary, and 18% are selling significantly more. Despite the aggressive promotion of private exchanges (PEX) and defined contribution (DC) strategies, brokers are not rushing their clients to use these approaches. The majority of brokers suggest a PEX less than 5% of the time. Large-case brokers are more likely to recommend PEXs than are smaller-case brokers. When private exchanges are recommended, defined contribution is not often included. In fact, a majority said that DC is included less than 25% of the time. Again, among large case brokers, DC plans seem to be more prevalent. While adoption of PEXs and DC plans may be just a matter of time, the report suggests that time is not now. For more information, visit www.eastbridge.com.
ANNUITIES
Total Annuity Sales Climb 8% In the Second Quarter
U.S. annuity sales reached $61.4 billion in the second quarter, rising 8% from the prior year. In the first six months of 2014, total U.S. annuity sales increased 10%, compared with 2013. “This is only the second time we have seen quarterly sales over $60 billion since the third quarter of 2011. Despite declining interest rates during the first six months of this year, fixed annuity sales continue to drive annuity sales growth,” said Todd Giesing of LIMRA. Total fixed annuity sales were $25.2 billion in the second quarter, up 34% versus prior year. Year-to-date (YTD), fixed annuity sales equaled $49.1 billion, a 39% increase from 2013. With a record quarter of index annuity sales driven by product innovation and expansion of distribution, combined with nothing to indicate that sales will drop significantly in the near future, sales may be pushing $50 billion for 2014, noted Giesing. Sales of fixed rate deferred annuities (Book Value and MVA) grew 30% in the second quarter, compared with prior year. Fixed-rate deferred annuities reached $15.8 billion in the first half of the year, a 42% increase compared to last year. Index annuity sales grew 40% in the second quarter, setting a new quarterly record of $13 billion. This is the first time that quarterly index annuity sales have accounted for more than 50% of total fixed annuity sales, with second quarter sales accounting for 52% of total fixed sales. YTD, indexed annuity sales grew 41%, totaling $24.3 billion.
Indexed annuity guaranteed living benefits (GLBs) election rates continue to be strong, with 72% electing a GLB when available (4% higher than in the first quarter). Deferred income annuity (DIA) sales reached $710 million in the second quarter, 33% higher than prior year. In the first six months of 2014, DIAs jumped 43%, totaling $1.3 billion. The top three writers continue to drive most of the DIA sales, accounting for 85% of sales. Single premium immediate annuity sales were up 37% in the second quarter to reach a record-matching $2.6 billion. LIMRA Secure Retirement Institute research shows that this is industry-wide growth — not coming from just one carrier.
Variable annuity sales fell five percent in the second quarter, totaling $36.2 billion. YTD, VAs reached $70.4 billion, a four percent drop from 2013. Many of the top VA sellers are focusing on diversifying their VA 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 GLB riders, when available, were 78% in the second quarter of 2014. For more information, visit www.limra.com.
NEW PRODUCTS
Worldwide Benefits
Minnesota Life and Securian Life are offering comparable and local market-appropriate benefits to employees scattered across the globe with a simplified with a multinational pooling strategy. It simplifies providing group life insurance. For more information, visit www.securian.com
Tools For Health Agents
Limelight is offering agents new tools to help individual and small business owners make sense of their employee health insurance options. QuotePad is the first live, all-in-one quote engine that provides a quick, real-time platform to quote and compare employee health benefit information. Using QuotePad from a desktop or mobile device, agents can compare thousands of health insurance plans, quote exchange and non-exchange plans, calculate costs with subsidies for individual consumers, and help employers find affordable coverage and adjust their contributions for popular tax-advantaged plans (HSA and HRA). The proprietary technology is private-labeled allowing agents to personalize with their company logo and branding. For more information, visit www.limelighthealth.com.
Cigna Launches Retail Exchange
Cigna’s private retail exchange will be available to Cigna clients and prospective clients across all of Cigna’s U.S. markets starting September 1. The suite of products available through the private exchange includes a variety of medical, pharmacy, dental, vision, life/accident and disability plans. With Cigna’s new offering, employees can access user-friendly online, interactive shopping tools to get a personalized recommendation for benefits for themselves and their families. For employers, the exchange offers a benefits administration platform that enables them to provide employees with more choice of plan designs and enables defined contribution funding, while simplifying their administrative responsibilities and helping them control their benefit costs. Cigna’s private exchange includes 24/7 live customer service for medical and dental customers, Cigna’s broad network of physicians and hospitals and integrated health and wellness programs, and is available with both fully-insured and self-funded health benefit plans. In addition to this proprietary solution, called Cigna Guided Solutions, Cigna is actively participating in a number of private exchanges administered by benefit consultants and brokerage firms that target active employees and retirees. Cigna also offers Benefits Insight through its Choicelinx subsidiary, providing employers and brokers with customized online enrollment, decision support and benefits administration services. For more information, visit www.cigna.com.
Survivorship Life
Lincoln Financial Group expanded its suite of Survivorship life insurance solutions with Lincoln WealthPreserve Survivorship Indexed Universal Life (SIUL), Lincoln’s first SIUL offering. It allows advisors to implement wealth preservation and estate planning strategies for clients, while offering cash accumulation and income potential in a tax-efficient manner. For more information, visit www.lincolnfinancial.com.
Simplified Life
John Hancock Insurance launched Simplified Life, providing a quick and easy solution to help clients meet their protection and wealth planning goals. Simplified Life is designed for consumers seeking the protection, cash value accumulation potential, flexibility and tax advantages offered by a variable universal life insurance policy – with the convenience of a quick-to-issue application process. In fact, with the product’s streamlined and transactional sales process, clients are not required to undergo a medical exam or tests — and most policies will be issued in eight days or less. For more information, visit jhsimplifiedlife.com.
Disability
Guardian Life is expanding its Student Loan Protection Rider to be available to anyone with student loan debt. Guardian is the only individual disability income insurance provider to offer this student loan protection. Available for as little as $5 per month, Guardian’s Student Loan Protection can be obtained for a 10- or 15-year term. For more information, visit www.GuardianLife.com.
Educational LTC Video
Insurance agents and financial professionals are invited to view a video explaining ways consumers can convert life insurance policies to pay for long term care. The video was recorded at the recent national industry conference organized by the American Association for Long-Term Care Insurance. To view the video go to http://www.fleetwoodonsite.com/aaltci_free_session.php
IN CALIFORNIA
CAHU Legislative Alerts
CAHU wants members to be aware of bills scheduled for hearing in the Legislature. To find out more information, click on the link below to review CAHU’s background on the bill, which includes an option to ask your legislator to take action.
Protect Out of Network Options
AB 2533 — OPPOSE
Protect Employer Choice
AB 2088 — OPPOSE
Protect Consumer Prescription Options
AB 1917 — OPPOSE
Protect Consumer Dental Care Options
AB 1962 — OPPOSE
WellPoint Changing to Anthem
WellPoint, Inc. will change to Anthem, Inc. Pending approval from shareholders, the change is expected to take place by the end of 2014. The company says that it is making the change n order to reduce complexity and express its commitment as a trusted partner in health.
Anthem Signs General Agent Agreement with Warner Pacific
Anthem Blue Cross (Anthem) and Warner Pacific have re-established their general agent agreement. Anthem, said “There have been many changes to the California small group market, such as advanced renewals, the implementation of the Affordable Care Act (ACA), grandmothering, etc. Subsequently, we performed an extensive general agent evaluation. As a result, Warner Pacific and Anthem have come to a favorable agreement… This is an exciting development for the Anthem Small Group team, which provides many partnership and growth opportunities. Some of which are as follows:
•Having one of the state’s largest and most respected General Agents representing our Small Group plans.
•Expanding our California partnerships and distribution channel.
•Enhancing broker influence and reach to promote the growth of our Small Group plans.
The agreement is effective for September 1st effective dates.”
