More Companies Increased Contributions to Help Employees Pay Premiums
Companies are more likely to have added or increased contributions to their employees’ premiums this year compared to the last two years, according to a study by the Transamerica Center for Health Studies (TCHS). The study of 1,500 employers was conducted by the Harris Poll from August 14 to September 3. Forty-four percent of companies expect their healthcare costs to increase in the next 24 to 36 months.
Most employers are trying to keep constant their contribution to employees’ premiums (57%), deductibles (60%), and co-pays/coinsurance (58%). Thirty percent want to maximize their contributions to employees’ premiums to help manage health insurance costs. TCHS Executive Director Hector De La Torre said, “The anticipated increase in healthcare costs correlates to improved quality for many employers.” Forty percent expect the quality of health insurance they offer employees to improve in the next 12 to 36 months while only 10% expect the quality to decline. Companies are most concerned about managing healthcare costs related to cancer (71%), drug expenses (69%), and diabetes and obesity (68%).
Sixty-one percent of employers offer wellness programs. Forty-nine percent of employers that have had a wellness program in the past 12 months say that saving money was the motivation. Eighty-two percent of companies say their wellness program improved workers’ health; 80% say it improved productivity and performance, and 71% say it reduced healthcare costs. De La Torre said, “Providing the best healthcare benefit package possible remains the top healthcare-related priority for employers. Interestingly, employers that offer healthcare benefits are more likely to anticipate profitability, hiring and wage increases in the next two years.”
Cadillac Tax Implications and SHOP Awareness
Eighty-two percent of employers offer at least one healthcare plan. Companies of all sizes are offering more options for healthcare plans. Forty-five percent say they are at risk for paying a Cadillac Tax for high-end health plans in 2018. Eighty-four percent of those at risk plan to change their health benefits to avoid the tax.
Fifty-five percent of companies with less than 50 employees are aware of the Small Business Health Options Program (SHOP), compared to 50% last year. A third say they know how to access SHOP coverage for their employees.
Other key findings include the following:
- 84% of employers say the ACA has had a positive or neutral effect on their business, yet 65% say the reporting requirements are burdensome.
- Twenty-three percent of small businesses (less than 50 employees) say the ACA has had a negative effect on their business compared to 11% of mid-sized businesses and 10% of large businesses. The reporting requirements have hit medium and large companies the hardest.
- 84% of employers agree that healthcare benefits are important in attracting and retaining employees. Eighty-eight percent of employees agree healthcare benefits are important to job satisfaction.
Health Insurance and Workplace Wellness
- There has been a steady increase of high-deductible health plans (HDHPs) and consumer-directed health plans (CDHPs) over the past two years – nearly two in three employers offer one of these types of plans along with a health savings account (HSA).
- 57% of employed adults say their employers should play an active role in their employees’ health. Sixty-eight percent say that they should pay lower health insurance premiums for participating in wellness programs.
- About two in five of employers that increased health insurance options also added other benefits or a workplace wellness program. About two in five said the change was due to pressure from employees.
- When it comes to wellness, employees are most likely to take advantage of preventative screenings and vaccinations (46%), health risk appraisals (38%), health goals/biometrics monitoring (36%), healthy food options (30%), and ergonomic workstations (30%).
- Employers that report a positive effect on healthcare costs are more likely to offer screenings (69% vs. 57%), website links to employee services (53% vs. 39%), and wellness initiatives (48% vs. 37%).
- 65% of the employers that offer wellness programs say they have complete leadership commitment and support, but only 45% say they have integrated health promotion into their organization’s culture.
For more information, visit https://www.transamericacenterforhealthstudies.org.
Hudson Institute Proposes Healthcare Plan Alternative
The Hudson Institute released a healthcare policy proposal authored by senior fellow Jeffrey Anderson. Presented as an affordable alternative to the Affordable Care Act, the plan would give individuals and families more control over their insurance arrangements, more options at a lower cost, and more decision-making authority over day-to-day healthcare expenditures.
The following are major recommendations in the proposal:
- Offer a simple, non-income-tested, refundable tax credit for the purchase of insurance through the individual market.
- Ensure that no American can be denied affordable health insurance on the basis of a preexisting condition through a series of specific protections.
- Establish a $7.5 billion annual federal fund for state-run high risk pools to allow individuals with preexisting conditions to purchase partially-subsidized health insurance with premiums capped according to personal income.
- Provide a one-time, per person $1,000 tax credit to help cover out-of-pocket costs for those with health savings accounts in the individual market.
- Authorize interstate purchases of health insurance, allowing the most affordable and effective plans to succeed.
The report can be accessed at http://bit.ly/1NlAgXc.
Group Asks Supreme Court to Review Challenge to Employer Mandate
The Association of American Physicians and Surgeons (AAPS) is asking the Supreme Court review a case that challenges the ACA’s employer insurance mandate (Stephen F. Hotze, M.D., and Braidwood Management v. Sylvia Mathews Burwell and Jacob J. Lew). Employer, Braidwood Management, says that it was forced to purchase ACA-compliant insurance at inflated premiums to avoid a $100 per-day/per-individual tax (or penalty). Braidwood Management says that, because of the ACA’s coercive intrusion, it could no longer purchase the pre-ACA low-cost insurance with the options it preferred. The ACA reduced market choices, increased prices, and limited some features that Braidwood Management and its employees valued.
The AAPS says that the mandate is unconstitutional because the Constitution requires all revenue-raising bills to originate in the House of Representatives. AAPS executive director Jane M. Orient, M.D. said, “The ACA is basically the Harry Reid bill. The…ACA was drafted in the Majority Leader’s office, outside the usual committee process. The legislative process [was] reduced to backroom horse-trading to secure the moderate members of the majority caucus without inviting input from the Senate minority.
The Fifth Circuit dismissed the case, saying that the Anti-Injunction Act (AIA) does not allow businesses to bring pre-enforcement challenges to the employer mandate (tax). But attorney Lawrence Joseph argues that the Anti-injunction Act does not apply to regulatory taxes under the ACA, nor does it prohibit challenges to illegal or unconstitutional taxes. Moreover, employers like Braidwood Management have no post-enforcement remedies to recoup a tax they never paid. Finally, even without ruling on ACA’s tax penalties themselves (as taxes), a federal court would have jurisdiction to stop the ACA’s unconstitutional intrusion into the health-insurance marketplace. “Some may say that, after a couple of big setbacks to challengers in the Supreme Court, ACA is here to stay. But because of its sloppy drafting, frenzied enactment, and widespread destructive effects on freedom, the economy, and the practice of medicine, there will be legal challenges as long as it is in effect,” Orient added.
Covered California Enrollment Exceeds 140,000
More than 140,000 consumers enrolled in Covered California coverage by Sunday, Dec. 13. At press time 295,000 to 450,000 consumers were expected to newly enroll in coverage. “Once again, Covered California is seeing an incredible surge of interest. Thousands of people are enrolling at storefronts, insurance agent offices, and community centers across the state every day,” said Covered California executive director Peter Lee. Although open enrollment runs through Jan. 31, 2016, consumers must have enrolled by midnight Dec. 15 to have their coverage start by New Year’s Day. An additional 1.4 million people statewide are believed to qualify for low-cost or no-cost Medi-Cal. Covered California estimates that about 750,000 uninsured Californians are eligible for subsidies. Lee said, “Our research shows that one-third of those eligible to get financial help to buy insurance don’t know it’s available, and we want to make sure our message reaches into every corner of the state.”
Blue Shield of California’s ACOs Report Cost Savings
Blue Shield of California and its Accountable Care Organization (ACO) provider affiliates have achieved more than $325 million in healthcare cost savings in the first five years. Kristen Miranda, Blue Shield’s senior vice president of strategic partnerships and innovation gave an update of the program at the Milken Institute’s recent California Summit. Since the program began in 2010, Blue Shield has been working closely with its ACO providers to help deliver better and more efficient patient care in the most appropriate setting. That work has resulted in helping to reduce hospital admissions by up to 13% and hospital bed days by up to 27%.
Blue Shield was one of the first health plans to implement a close collaboration with physician groups and hospitals for coordinated care for Californians. The program began in 2010 with Dignity Health and Hill Physicians in Northern California. It has grown to 35 ACO collaborations serving more than 325,000 Californians and is available to nearly 200,000 additional residents throughout the state including the San Francisco Bay Area; the Silicon Valley; the Sacramento area; Los Angeles, Orange, and San Diego counties; the Inland Empire; and the San Joaquin Valley.
California Ranks 16th Among All U.S. States in Health
California ranks 16th in the country’s annual health checkup, according to a report by United Health Foundation. California’s strengths include low prevalence of smoking and obesity. The state’s challenges include high levels of air pollution and large disparity in health status by education level. Nationwide, Americans are less sedentary and are smoking less. But the nation’s health is threatened by rising rates of drug deaths (including illegal and prescription drug abuse), diabetes, obesity, and children in poverty. In 2015, Americans nationwide are making meaningful progress on key such as, smoking less and leading less sedentary lives. There are serious challenges ahead with rising rates of drug deaths (including deaths from illegal drug use and prescription drug abuse), obesity, diabetes, and children in poverty. To see the national and state rankings in detail, visit www.americashealthrankings.org
California’s Three Largest Health Insurers Among Few to Show Obamacare Profit in 2014
The Los Angeles Times reports that Blue Shield of California led the country with $107 million in profit on Obamacare policies sold to individuals. Kaiser Permanente was second with $66 million, and Anthem Blue Cross ranked seventh nationally with a $9-million surplus in the Covered California exchange. In the first year of the massive coverage expansion, California’s three largest health insurers bucked the national trend of heavy losses and accounted for half of the gains reported under the Affordable Care Act in 2014.
Blue Shield of California led the country with $107 million in profit on Obamacare policies sold to individuals. Kaiser Permanente was second with $66 million, and Anthem Blue Cross ranked seventh nationally with a $9-million surplus in the Covered California exchange.
Nationwide, insurers reported just $362 million in total profit under a federal rate-stabilization program, while most insurers recorded big losses — a total of $2.87 billion.
Critics have seized on the industry losses as a sign that the health law is failing. Those concerns were amplified when the nation’s largest insurer, UnitedHealth, warned that it may quit selling Obamacare policies because the business was so unprofitable. Now some experts point to California’s experience as a sign that this can be an attractive business for insurers — so much so that it has raised questions about whether state officials should have pushed harder for lower rates.
The data show insurers did not do well nationally, said Larry Levitt, a senior vice president at the nonprofit Kaiser Family Foundation. But in parts of the country where things were working smoothly, like California, insurers were making money.
This new federal data offer the most extensive look yet at how insurance companies fared under the new rules of the Affordable Care Act. The figures are part of a risk corridors program designed as a temporary cushion against high medical claims during the first three years of the national healthcare overhaul.
Under the program, insurers that made money were required to send those funds to the federal government to offset the losses of other companies participating in Obamacare. The arrangement means that California insurers won’t keep these 2014 profits.
Neither will the companies that lost money be made whole right away. The losses were so widespread, and the gains so paltry, that the federal government could only cover 13 cents for every dollar the companies lost. Officials have vowed to use money from this year and 2016 to pay what’s already owed.
Several factors helped California health plans outperform the nation, including strong early enrollment and a politically unpopular decision on policy cancellations. Amid a national uproar, Covered California defied the Obama administration and required participating insurers to cancel existing individual policies at the end of 2013.
That move created a healthier, more diverse mix of old and new policyholders at the start of the exchange. About 35 other states allowed consumers to stay longer on health plans that didn’t comply fully with the new law. That decision left many states with a smaller and sicker population signing up for Obamacare. Many new enrollees had been denied coverage previously because of pre-existing conditions.
“Federal data show that California had the healthiest risk pool of all 50 states,” said Mike Beuoy, a vice president and actuary at Blue Shield. But he and other industry officials say it was hard to predict what would happen heading into the first year of Obamacare coverage.
“We were setting rates for 2014 in the absence of any hard information on what the risk pool would look like,” Beuoy said.
Insurers noted that these excess profits represent a small percentage of the $4.6 billion in premiums paid in the Covered California exchange during 2014. Taxpayers paid about 70% of those premiums through federal subsidies that consumers received based on their income, state data show. “In hindsight, the rates we charged in the individual market were higher than they needed to be,” said Mick Diede, chief actuary at Kaiser Permanente, the state’s largest insurer. For 2015, Kaiser cut its rates 1.4%, on average.
“I think the California experience was a bit of an anomaly,” Diede said. We expect it to even out. Other California insurers may have been helped by the fact that many consumers had difficulty finding a doctor or getting care during 2014. That could have reduced medical claims, boosting the bottom line for companies.
Blue Shield and Anthem Inc., in particular, struggled to deal with the surge of applicants early on and then compounded those enrollment glitches with inaccurate provider directories, regulators found. Officials at Covered California and the insurers say they are examining to what extent those barriers reduced claims.
Michael Johnson, a former Blue Shield official and now a company critic, said the San Francisco insurer should issue more refunds to customers. Blue Shield made this huge profit because they hindered access to care, he said. The company already paid rebates worth $62 million to its individual policyholders for 2014 because it didn’t spend a minimum of 80% of premiums on medical care. A spokesman for Blue Shield said its customer service and provider information have both improved since last year.
A recent report underscores how well California health insurers have held the line on spending premium dollars on medical care despite enormous changes in the market. California was one of only three states nationwide in 2014 where insurers paid out less than 80 cents of every dollar in premiums on medical care, according to Urban Institute researchers. The state went from 81.5% in 2010 to 79.8% last year for the individual market.
Last year’s surplus in California might prompt regulators to take a closer look at the rates that individuals and families are paying for Obamacare. Did Covered California push as hard as it could on rates? It’s a legitimate question to ask, said Katherine Hempstead, who studies health insurance issues at the Robert Wood Johnson Foundation. Unlike most other states, California negotiates premiums with health plans and doesn’t allow every insurer into its exchange.
Peter Lee, Covered California’s executive director, said the state has been effective at achieving stable rates that spare most consumers from double-digit increases annually. The average rate increase in Covered California was 4% for both 2015 and 2016.
A few plans in California made a little bit more than they thought they would in 2014, Lee said. This is evidence the California exchange market can work for patients as well as health plans.
Tax Credits Awarded to Insurers Investing In California’s Underserved Communities
California Insurance Commissioner Dave Jones announced $9.3 million in tax credits awarded to insurance companies and other investors. Each year, the Dept. of Insurance allocates $10 million in tax credits to support $50 million in capital for community development from insurance companies and other investors. Investors earn a tax credit worth 20% of their investment. This capital helps create jobs, build affordable housing, and fund other projects that improve the quality of life in communities and neighborhoods throughout the state.
Among others, tax credit allocations were awarded to the following:
- CSAA Insurance Group for its $353,235 investment into Enterprise Community Investment for its California Hotel project located in Oakland. It provides affordable housing by offering 13 one-bedroom and four two-bedroom units to individuals and families in need.
- MetLife for its $3 million investment into Genesis LA Economic Growth Corp. This investment will promote safe and healthy communities in East Los Angeles through a learning center that provides summer camps and school enrichment programs, workforce development programs, and funding for a homeless servicing agency.
- United HealthCare for its $3 million investment into Enterprise Community Loan Fund to rehabilitate Gabilan Plaza apartments, an affordable housing project for low-income families in Salinas, California.
For more information, visit http://www.insurance.ca.gov.
Life Insurance Sales Were up in November
Application activity for individually underwritten life insurance was up 2.7% in November year-over-year, according to the MIB Life Index. This marks the 16th month of expansion for the Index with March 2015 as the only exception. At November’s close, the MIB Life Index was up 2.7% year-to-date. November’s activity outpaced that of October by 9.7% as insurers build sales momentum toward year-end. The mid-year MIB Life Index video report is available from www.mibgroup.com.
NAHU and the American College Team up on Education
The National Association of Health Underwriters (NAHU) and The American College of Financial Services formed an educational partnership. The American College will focus on offering credentials and degrees for financial advisers, wealth managers, and planners while NAHU will broaden its focus on employee benefits and healthcare education. The two organizations will continue to refer students to each other. NAHU is taking over the American College’s designations for Registered Employee Benefits Consultant (REBC) and Chartered Healthcare Consultant (ChHC). The College will continue to accept new students into the REBC and ChHC designation programs until Jan. 1, 2016. Enrolled students have until June 3 of 2017 to complete these designations with The College. NAHU expects to begin accepting new students into its revised REBC and ChHC designation programs by early 2017. For more information, visit TheAmericanCollege.edu or www.nahu.org.
Inside Sales Book
Justin Roff-Marsh, president of Ballistix wrote the book, “The Machine: A Radical Approach to the Design of the Sales Function.” The book is available on Amazon and through all major booksellers.
Universal Life Insurance
John Hancock introduced the John Hancock Vitality solution. Accumulation variable universal life insurance policyholders can take simple steps to improve their health and increase their policy cash value while earning rewards and discounts. For more information, visit the at www.thevitalitygroup.com.
Retirement Plan
John Hancock Retirement Plan Services launched improved participant websites for all product lines. With input from advisors, plan sponsors, and participants, the websites offer one-click navigation, tailored education, and tools to help participants take data driven and participant-smart actions on the path to retirement. Participants in all of John Hancock’s plans, across all market segments, now have a more user-friendly interface, easy access to tools, fewer clicks needed to take action, and a simplified navigation experience. For more information, visit http://www.johnhancock.com.
DOL: Whatcha Gonna Do When They Come for You?
by Francesca Federico, AIF, CDFA
Growing up in a family business, I learned that you are only as good as the people you surround yourself with. To quote my father Paul Federico, “My employees are my greatest asset. I make sure they know that every day.” Most companies put retirement plans in place to retain and reward their employees, but what they don’t realize is that they need to constantly monitor those plans. If they don’t, not only can it hurt their employees, but it can also hurt them.
Over the last few weeks, I met with a myriad of companies and left feeling discouraged and confused. Many of them have no clear process around their retirement plans. Why did I find this so upsetting? Because participants bear the majority of the cost associated with their 401(k)s. As a result, the Department of Labor (DOL) is making it their mission to audit employers/plan sponsors to ensure they are complying with retirement plan regulations. An estimated 75% of retirement plans audited by the DOL last year were fined. In fact, the average fine last year was $600,000 per plan. That’s a jump of nearly $150,000 from four years ago.
In the past few years, the DOL’s Employee Benefits Security Administration (EBSA) has redoubled its efforts to promote compliance among plan sponsors. In fiscal 2013, the EBSA collected $1.69 billion in plan restorations, fines and penalties from retirement plans, according to the DOL.
The DOL expects that figure to keep rising. Last year, the agency added nearly 1,000 employees, most of them assigned to enforce compliance among plan sponsors. This means more 401(k) plans will face an audit this year, and potentially hefty fines if their plans are mismanaged.
It’s truly in employers’ best interests to take a closer look at their company retirement plans because: 1) they should do right by their employees, and 2) to ensure they would pass muster in the event of a DOL audit.
As for me, I’m back on my merry way contacting HR Directors, CFOs, and CEOs to help them monitor their plans, and if my booming Italian voice can’t get through to them, then all I can say is, “Bad boys, bad boys ˗ Whatcha gonna do, whatcha gonna do when they come for you?” For more information, email francesca@twelvepointswealth.com.
Smaller Commercial Firms Beat Larger Firms in Consumer Satisfaction
When it comes to consumer satisfaction, smaller commercial insurance firms outperform larger firms, according to a survey by J.D. Power. Smaller brokers get average satisfaction ratings 8.46 out of 10 compared to larger brokers who get an average score of 8.27. “Reinforcing the concept that bigger is not always better, smaller brokers are meeting the needs of customers more effectively than their larger counterparts,” said Greg Hoeg, vice president of the U.S. insurance practice at J.D. Power. The ability to perform well across the various aspects of the customer experience leads to higher satisfaction, especially when it comes to imparting quality advice and guidance and charging reasonable fees.
The study also measures commercial property insurers and workers’ compensation insurers based on five factors: interaction; program offerings; price; billing and payment; and claims. For property insurance, interaction (845) is the highest-scoring factor and billing and payment (761) is the lowest. Interaction (819) is also the highest-scoring factor for worker’s compensation insurance, offsetting lower scores in claims (762), price (760) and billing and payment (748). In commercial property, activities that occur at the front end of the business—service interactions and program offerings—tend to be more satisfying than the back-end processes—billing and payment and claims. For more information, visit www.jdpa.com.