Despite efforts to rein in health care costs, roughly half of large U.S. employers will face the excise tax in 2018; and the percentage is expected to rise significantly in subsequent years, according to an analysis by Towers Watson. The Congressional Budget Office expects a $79 billion excise tax burden from 2018 to 2023.
As part of the Affordable Care Act (ACA), the excise or Cadillac tax is a 40% tax on the value of all affected health care programs a participant elects that exceed certain dollar thresholds in 2018 and beyond. This non-deductible excise tax must be paid by the employer although some employers are considering shifting the costs to plan participants. Seventy-three percent of employers are concerned about triggering the tax, and 62% say it will have at least a moderate effect on their health care strategy in 2015 and 2016. The survey revealed that 48% are likely to trigger the tax in 2018; and 82% could cross the threshold by 2023.
Trevis Parson, chief health actuary for Towers Watson said, “Even with conservative projections, the impact of the excise tax on employers is substantial, yet it is often not fully understood. Each company will need to look at the tax carefully based on its own programs, and we expect a great deal of variation by industry.”
Randall Abbott, a senior health strategist at Towers Watson said, “Even a Chevy may be affected by the Cadillac Tax. For most employers, the excise tax will be a question of when, not if, unless action is taken. The ACA has put a timer on cost management for many employers and unless one cuts benefits or improves program performance there’s a real risk of triggering it.” Abbott says that these three key factors are not well known about the tax:
1. The excise tax is based on employer and employee premium contributions, not just what the employer pays for coverage.
2. The definition of what’s included for calculating the tax extends to tax-advantaged health care accounts, such as health flexible spending accounts, health reimbursement accounts, and pretax contributions to a health savings account.
3. The tax is not determined by the value of the medical plan, but rather the value of all affected health benefits elected by an employee or family. The tax is based on the aggregate value of the programs an employee elects, not just the medical plan value itself.
Annual increases in excise tax thresholds are not based on health care cost inflation, but on the Consumer Price Index, which was 1.5% for 2013. That is far less than medical cost trend and considerably less than the 4% annual health care cost increases that better performing employer health plans are expected to achieve after plan changes in 2015 .
Abbott said, “With so much at stake, it is critical that companies take a close…look at their health programs and understand their projected costs…It also highlights the need for companies to improve their health program performance…The good news is that many have already taken steps, and with proper plan management, the impact of the tax can be significantly mitigated. In fact, Towers Watson estimates that the number of companies expected to trigger the tax would be considerably higher if not for the variety of actions that employers have already taken or are likely to take as they better understand the challenge. “For more information, visit www.towerswatson.com.
Medicare Advantage Premiums Climb
The number of $0 premium Medicare Advantage plans will decrease 19% from 2014 to 2015, according to HealthPocket. The analysis is based on the federal government’s 2015 Medicare insurance data. The average Medicare Advantage premium will be $62.69 in 2015, which is 2% higher than in 2014. It is also 94% higher than the average of $32.26 that the government reported before changing how it calculates average premiums. The 2015 premium average is based on anticipated plan enrollment rather than average premiums of all Part D plan options. The report includes the following statistics:
• The average drug deductible for 2015 Medicare Advantage plans is $129.87, which is 94% higher than in 2014. The maximum allowable drug deductible is $320 in 2015.
• The average all Medicare Part D drug plan for 2015 is $53.90, which is 1% lower than in 2014. However, it is 68% higher than the average premium before the government changed how it calculates average premiums.
• The average deductible for 2015 Medicare Part D drug plans is $157.91, which is 1% higher than in 2014. The maximum allowable Medicare Part D deductible is $320 in 2015.
• The cap on out-of-pocket costs for covered drug expenses in Part D and Medicare Advantage plans is $4,700 in 2015. This limit is $150 higher than in 2014. After this out-of-pocket threshold is reached, the beneficiary gets catastrophic coverage with lower drug cost-sharing.
For more information, visit HealthPocket.com.
EMPLOYEE BENEFITS
Consumers Like Integrated Benefits
A WellPoint survey reveals that 81% of consumers say it would be extremely helpful to have the same carrier provide their dental, vision, and health coverage. Survey respondents most frequently point to cost as being extremely important to consider (67%), followed by comprehensiveness of coverage (61%), customer service (60%), and ease of use (58%). Additionally, 86% would expect to save time, save money, or get better care if they had the same carrier integrate dental with their vision and medical benefits. Forty-one percent say it’s time consuming finding health care providers that accept their insurance. For more information, visit www.wellpoint.com
Vision Carriers Get a Boost From Employer Dynamics and Population Shifts
Interest in vision insurance is strong thanks to several trends, according to a report by A.M. Best. The economy is recovering, employment is rising, employers are adding vision coverage, enrollment is increasing, and consumers are enjoying more disposable income. While all qualified health plans under the Affordable Care Act (ACA) must include pediatric vision coverage, they don’t have to include adult vision coverage. Historically, vision plans only have been sold as group benefit plans through employers. The vision insurance market remains highly competitive because of its concentrated nature, with top players poised to take advantage of emerging trends. Also, vision coverage is the least expensive of the four primary health benefits after major medical, prescription drug and dental. Only about half of employers offer vision coverage, despite its demand and relative inexpensiveness. To get a copy of the report, visit: http://www3.ambest.com/bestweek/purchase.asp?record_code=228850.
LIFE INSURANCE
Life Products Move Beyond Death Benefits
“These are really exciting times for life insurers as the industry is looking to emerging products [that] might combine traditional mortality benefits with coverage for illnesses and long-term care,” said Mike Burns, senior vice president of life solutions at Lincoln Financial Group. He was interviewed on A.M.BestTV. Burns said that Lincoln will be focusing enhancing consumer awareness of the following:
• How life insurance can build up cash value to create income security.
• Innovations that would enable the industry to reach untapped markets.
• Enhanced service that makes it easier for advisers and consumers to conduct business.
Click here to view the video program: http://www.ambest.com/v.asp?v=burns914.
EVENTS
Free Online Course in Workplace Wellness
The University of Wisconsin is offering a free online workplace wellness course, “Dynamics of Worksite Wellness Evaluation and ROI.” It starts October 20. In each of the four weekly sessions, participants view instructional videos and engage in readings, activities, and online discussions. To register, visit http://info.wisconsin.edu/hwm-mooc/.
New Products & Services
Medicare Supplement and Advantage
SeniorQuote Insurance Services is now licensed nationwide. SeniorQuote allows Medicare-eligible seniors to cross-shop multiple carriers for Medicare Supplement and Medicare Advantage Plans, with additional support and guidance from a team of insurance professionals. For more information, visit SeniorQuote.com or call 800-992-7724.
Disability Coverage for Part-Timers
The Principal Financial Group is offering individual disability income insurance for part-time employees to purchase. Coverage is available for employees working 20 to 29 hours per week and earning over $40,000 annually. For more information, visit www.principal.com.
Fixed, Deferred Income Annuity
Pacific Life is offering Pacific Secure Income. The deferred income annuity can provide a pension-like stream of guaranteed income. It uses a portion of assets to guarantee income later in retirement. The longer clients wait to take income, the higher their future annuity income payments will be. Clients can choose a single purchase payment or build income through multiple purchase payments. For more information, visit www.PacificLife.com.
Pharmacy Benefit Marketplace
Truveris introduced RxChoice, a pharmacy benefit marketplace. RxChoice allows benefit brokers and health plan advisers to generate free pharmacy benefit quotes from vendors and award contracts in minutes. For more information, visit www.truveris.com.
Cigna and HSA Bank Team Up
Cigna is teaming up with HSA Bank to administer the Cigna Choice Fund health savings accounts (HSAs). Cigna’s health savings account funds have been administered by JPMorgan Chase Bank, N.A., which has agreed to sell its HSA administration business to HSA Bank for an undisclosed amount. The transaction is subject to regulatory approval. For more information, visit www.cigna.com or www.hsabank.com.
In California
Covered California Announces SHOP Plans
Plans under Covered California’s Small Business Health Options Program (SHOP) now offer more benefit choices and options for adult dental coverage. Employers can offer coverage from two different metal tiers for small businesses starting coverage October 1 or later. The dual metal tiers must be adjoining: Bronze and Silver plans, Silver and Gold plans, or Gold and Platinum plans. Also, alternate benefit designs are being offered through three of SHOP’s carriers: Health Net, Kaiser Permanente, and Western Health Advantage. These alternate benefit designs meet the essential health benefits requirement of the Affordable Care Act, but vary from the standardized benefits established by Covered California. The plans provide expanded employee choice. Also, employers can now offer separate dental plans for adults beginning in 2015. Dental benefits are employee-paid, with no additional cost to employers. The six health plans and 10 dental plans offered through SHOP are a mix of HMOs, PPOs, and exclusive-provider organizations. The health plans are from the following health insurance companies:
• Blue Shield of California
• Chinese Community Health Plan
• Health Net
• Kaiser Permanente
• Sharp Health Plan
• Western Health Advantage
The following are successful bidders for Covered California’s SHOP dental coverage: (Dental Health Services is an additional dental carrier for 2015.)
• Access Dental Plan
• Blue Shield
• Delta Dental
• Dental Health Services
• Guardian
• Liberty Dental
• Managed Dental Care
• MetLife.
• Premier Access.
• Safeguard Health
Businesses are not mandated to enroll in SHOP, and there is no penalty for not participating. California businesses with 50 employees or fewer can choose from quality health insurance plans similar to those available to larger businesses. Businesses with fewer than 25 employees are eligible for tax credits exclusively available through Covered California’s SHOP. Covered California’s SHOP has enrolled 1,714 businesses, which accounts for 11,510 employees and their dependents. Open enrollment for SHOP is available year-round.
New Law Helps Californians Avoid Losing Their Insurance Coverage
In 2016, insurance policyholders can designate a third party as their back-up contact to get notifications from their insurance carrier if the policy is in danger of being cancelled due to nonpayment of premiums, thanks to legislation signed by Governor Jerry Brown. Only life insurance and long-term care policyholders have had this protection. AB 1804 expands the protection to automobile, homeowners, renters, and disability income insurance policies.
New Law Increases Financial Data Protection for Insurers
Governor Brown signed a law that protects the confidentiality of state investigations into the financial health of insurance companies. Under AB 1234 (Levine), the Department of Insurance cannot be forced to provide sensitive financial data as evidence in a civil proceeding. Commissioner Dave Jones said, “Critical and confidential information necessary to ensure solvency of insurers is now better protected.” The California Department of Insurance sponsored the legislation to align California law and practices with the National Association of Insurance Commissioners (NAIC) Model Act.
Hispanic Market Initiative
Combined Insurance launched its Hispanic market initiative in California, Texas, and Florida. Combined Insurance is a leading provider of individual supplemental accident, disability, health and life insurance products, and an ACE Group company. By the end of 2014, the firm plans to hire 220 bilingual agents. Doug Abercrombie of Combined Insurance said, “The Hispanic population is significantly growing,…yet more than 30% of Hispanics lack health insurance, making this an under-served market that our products and services fit well into.” Leading the Hispanic market initiative will be Jorge Enderica, who joined Combined Insurance in July as vice president, national sales-Hispanic markets. He said, “The growing Hispanic population represents more than $1 trillion in purchasing power… It is also a community that can be particularly well served with supplemental insurance.” For more information, visit www.combinedinsurance.com.
Digital Benefit Advisors Acquires Three Firms
Digital Benefit Advisors (DBA) in Northern California has acquired Clark Benefits, Drew Miller Insurance Services, and Shargel & Co. DBA, which is the nation’s largest employee benefits-only company, is expanding its mid-market advisory services across the country with 24 offices. DBA is adding offices in Santa Cruz and San Francisco, increasing the team to 22 professionals and bringing more than 250 clients on board. For more information, visit digitalbenefitadvisors.com.
