HEALTHCARE
• More Employers to Move Away from Managed Care
• Should the Fee-for-Service System be Scrapped?
• Americans Are in the Dark About Preventive Coverage
• Prescription Drug Spending Drops
Proposed Rule Would Cut Red Tape
LONG TERM CARE
• Boomers Don’t Expect Their Children to Foot LTC Costs
• Home Care Accounts For Half of New LTC Claims
LIFE INSURANCE
• MassMutual Announces Record 2012 Financial Results
FINANCIALPLANNING
• Advisor Optimism Soars
NEW PRODUCTS AND SERVICES
• LinkedIn Financial Insight Group for Advisors
• Life Insurance
IN CALIFORNIA
• The Tax Credit Deadline Is Approaching
• LAAHU University Day Is In May
• Autism Advisory Task Force Report
• Jones Announces Emergency Regulation For Autism Coverage
More Employers to Move Away from Managed Care
Almost two-thirds of employers plan to move away from traditional managed care benefits and require employees to take a more active role in health care planning, according to a report by Aon Hewitt.
Ninety-four percent of employers surveyed by Aon Hewitt will continue to offer health benefits in the next three-to-five years. John Zern of Aon Hewitt said, “Employers are staying in the game, but they are taking bold…steps to achieve more effective results and they are doing so at a faster pace than we’ve seen in prior years.” The vast majority of employers don’t expect the emerging individual market to replace the employer-based system. Just 6% plan to stop offering health coverage completely in the next three-to-five years. Between the Affordable Care Act’s penalties for failing to offer coverage and the risk of losing top talent, most employers believe they need to continue to play a role in employee health.
In the next three-to-five years, almost 40% of employers plan to reserve a portion of their health care dollars for employees who exhibit good health behavior or make measurable progress toward health goals. For example, employees who take health risk questionnaires and biometric screenings may be rewarded with lower premiums or access to broader health coverage. Other employers may waive prescription drug co-pays for employees who follow doctor’s orders in managing a chronic condition. Some employers are working with health plans to offer incentives to use small networks of high quality and cost-efficient providers.
Over the past decade, employers have reserved more of their cash compensation program to pay-for-performance bonus programs. “We see similar approaches emerging with health benefits that reward employees who actively participate to achieve improved health outcomes,” said Zern.
Private health care exchanges are quickly generating interest among employers. About 28% plan to move into a private health care exchange over the next three-to-five years. With this model, employees choose plan options and carriers. Private health care exchanges re-create a competitive health insurance market based on consumer choice. This will encourage insurance companies to strive for greater efficiency, said Jim Winkler of Aon Hewitt.
Aon Hewitt expects health care costs to rise 8% to 9% per year for the foreseeable future. Worsening health issues including obesity, smoking, and failure to comply with medications will contribute significantly to health care costs. Employer health care spending has increased 40% in the past six years to approximately $8,800 per employee. At the same time, employee premiums and out-of-pocket costs increased 64% to almost $5,000 per year. For more information, visit www.aonhewitt.com.
Should the Fee-for-Service System be Scrapped?
The National Commission on Physician Payment Reform recommends eliminating stand-alone fee-for-service physician payments by the end of the decade. The group says that the fee-for-service system, in which doctors get paid for each service, is a chief driver of the high health care costs and uneven health care quality. With fee-for-service, skewed financial incentives promote fragmented care and encourage doctors to give more care and more costly care regardless of the benefit to patients, according to the Commission. The Commission is chaired by former Robert Wood Johnson Foundation president Steven Schroeder, M.D., with former Senator Majority leader Bill Frist, M.D., as honorary chair.
The Commission offers a five-year blueprint for transitioning to a more value-based, mixed payment model. Initial steps include fast-tracking accountable-care organizations and patient-centered medical homes that reimburse doctors through fixed payments and shared savings and adopting bundled payments for patients with multiple chronic conditions and in-hospital procedures and their follow-up.
The Commission also offers the following recommendations:
• For Medicare and private insurers, increase annual payment for evaluation and management codes, which are undervalued.
• Eliminate higher payments for facility-based services that can be performed in a lower-cost setting.
• Always incorporate quality metrics into negotiated reimbursement rates for fee-for-service contracts. Today, technical services by surgeons, radiologists and other procedural specialists are reimbursed at a much higher rate than are E&M services, such as preventive health care or office visits to discuss diabetes management. This discourages doctors from spending time with patients, particularly patients with complex chronic illness. It also contributes to the nation’s shortage of primary care providers. For example, in 2011, a radiologist earned an average of $315,000 a year while a family doctor earned an average of $158,000. Over the past years, there has been a trend toward lower reimbursement for medical services performed in outpatient facilities than in in hospitals. For example, Medicare pays $450 for an echocardiogram in a hospital and only $180 in a physician’s office.
• Fee-for-service reimbursement should encourage practices with fewer than five providers)to share resources to achieve higher quality care.
• Medicare’s Sustainable Growth Rate should be abolished. The Relative Value Scale Update Committee would make decision-making more transparent and diversify its membership so that it is more representative of the medical profession. For more information, visit www.PhysicianPaymentCommission.org.
Americans Are in the Dark about Preventive Coverage
Thirty percent of U.S. adults don’t know what kind of preventive care their policy covers, according to a report by TeleVox. Only 32% of Baby Boomers are receiving their recommended preventive care. Eleven percent 11% of mothers say they have no idea what preventive care actually means. For more information, visit www.televox.com.
Traditional Prescription Drug Spending Drops
In 2012, U.S. spending on traditional prescription drugs fell for the first time in more than 20 years, according to data by Express Scripts. Traditional prescription drug spending fell 1.5% in 2012 among the country’s commercially insured population. However, this decline was offset by an 18.4% increase in spending on specialty medications to treat more complex diseases, such as rheumatoid arthritis, cancer, and hepatitis C.
Glen Stettin, MD of Express Scripts said that the drop in traditional drug spending is due to the success of utilization management programs and a growing interest in generic medications, home delivery pharmacies, and more focused retail pharmacy networks. Stettin added, “Effective management solutions and increased drug competition are necessary…to rein in specialty drug costs…and increased drug competition, in the form of biosimilars, is necessary to offer more affordable medication.” Last year’s patent cliff ushered in lower-cost generic alternatives for many blockbuster medications and utilization increased for eight of the top 10 traditional therapy classes, while unit costs decreased in seven.
For the second consecutive year, the country spent more on prescription drugs for diabetes than for any other therapy class. Diabetes drug spending increased 11% in 2012, driven, in part, by unit cost increases for popular insulins. Spending on medications to treat attention disorders increased 14.2% in 2012. Utilization increased 8.8%, due largely to an increased number of adult patients. Unit costs increased 5.4% as a result of a 2012 shortage of active ingredients contained in many of the medications in this class.
While affecting fewer than 2% of the general population, specialty conditions in 2012 accounted for 24.5% of pharmacy benefit drug spending — the highest percentage on record. Specialty medications often require specialized handling, frequent dosing adjustments, and intensive clinical monitoring and patient assistance. The costliest specialty category was for inflammatory conditions such as rheumatoid arthritis; drug spending increased 23%. This increase was driven by a 9% increase in utilization and a 14% increase in unit costs.
There was a 33.7% increase in hepatitis C spending, which is a bigger increase than any other major traditional or specialty therapy class. The increase is due almost entirely to two new drugs being introduced in May 2011. Express Scripts expects total spending on hepatitis C medications to increase 32.3% in 2013 and another 56.3% in 2014.
For cancer medications, utilization increased 3.4% and costs increased 22.3%. Driving much of the cost increases are new drugs that treat unique genetic profiles — a trend that increased in recent years.
In 2012, the Food and Drug Administration approved 22 new specialty drugs, many of which will cost more than $10,000 per month of treatment.
Doctors who are more likely to prescribe generic medications to Medicare patients are younger, see a large number of Medicare patients, and practice in Midwestern states such as Ohio, Illinois, and Michigan.
As more Americans seek treatment for drug and alcohol abuse, chemical dependence is now among the top 10 traditional therapy classes when it comes to Medicaid drug spending. At 24.3% in 2012, chemical dependence drugs account for the largest percentage increase in Medicaid drug spending.
Utilization of cancer medications increased 11.8% for Medicare patients in 2012, contributing to a 32.8% spending increase for this population. Medicare patients increased utilization of hepatitis C medications by 63.5% in 2012. Infection rates for the virus are more prevalent among patients born 1945 to 1965.
Medicaid spends more on asthma medication than on any other single condition. Total asthma spending increased 6.2%, driven largely by increased utilization.
Prices for the most highly utilized brand-name medications increased 12.5% in 2012, far outpacing the general inflation rate of 1.7%. During the same period, generic medication prices declined 24%. This 36.5 percentage point net inflationary effect is the largest single-year widening of brand and generic prices since Express Scripts began calculating its Prescription Price Index in 2008. The full report is available at www.DrugTrendReport.com.
Proposed Rule Would Cut Red Tape
Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced a proposed rule that would establish a unique health plan identifier under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The proposed rule would provide a unique identifier of a standard length and format to facilitate routine use in computer systems. This will allow provider offices to automate and simplify their processes, particularly when processing bills and other transactions.
The proposed changes would save health care providers and health plans up to $4.6 billion over the next 10 years, according to estimates by the HHS. The estimates were included in a proposed rule that cuts red tape and simplifies administrative processes for doctors, hospitals and health insurance plans. These codes, known as the “International Classification of Diseases” will include new procedures and diagnoses.
The proposed rule also delays required compliance by one year for new codes used to classify diseases and health problems – from Oct. 1, 2013, to Oct. 1, 2014. Many provider groups have expressed serious concerns about their ability to meet the Oct. 1, 2013, compliance date. The proposed change in the compliance date for ICD-10 would give providers and other covered entities more time to prepare and fully test their systems to ensure a smooth and coordinated transition to these new code sets. The proposed rule announced is the third in a series of administrative simplification rules in the new health care law. More information on the proposed rule is available on fact sheets at http://www.cms.gov/apps/media/fact_sheets.asp.
Boomers Don’t Expect Their Children to Foot LTC Costs
About half of people age 50 and over say that paying for their LTC costs will take away from the money intended for their children as an inheritance. Forty-three percent would rather use these funds to cover LTC costs than pass money to their heirs. However, the escalating costs of health care and lack of proper planning have many Americans hoping just to break even and not be a burden to their children. The Harris Interactive poll surveyed 813 Americans age 50 or older with at least $150,000 in income or investable assets.
Only 21% expect their children to be helping them in retirement – including giving physical care and financial support, and letting them live in their homes.
The survey also reveals the following:
• 45% have discussed the cost of LTC with their spouse; 23% have discussed it with their financial advisor; 10% have discussed it with their children; and 6% have discussed it with their parents.
• Only about 11% of people over 55 have LTC insurance.
• 23% are not planning for LTC expenses; 22% plan to cover the costs with their 401(k) or retirement savings; and 21% plan to use their personal savings.
• 64% are not aware that some states have laws that can force children to pay their parents’ unpaid nursing home bills.
John Carter, president of distribution and sales for Nationwide Financial said, “It is important to start discussing LTC planning as a family and develop a well thought out plan so that parents and children understand where LTC funding will come from and parties feel secure in the approach.” The traditional stand-alone LTC policy is the most commonly known long-term planning choice. While these products are very customizable, some people don’t like the use it or lose it aspect. Some innovative products include LTC riders that can be added to life insurance coverage, he added.
Advisors report that only 15% of their clients have a good understanding of the potential costs of LTC. People living to age 65 have a 70% chance of needing some type of LTC in their lifetime. The average cost per year for a nursing home is projected to be $265,000 by 2030 and that is not even for a private room. For more information, visit http://www.nationwide.com/life-insurance.jsp.
Home Care Accounts For Half of New LTC Claims
As of December 31, 2012, 264,000 people were getting long-term care insurance benefit payments, according to a report by the American Association for Long Term Care Insurance (AALTCI). Last year, insurers paid $6.6 billion in benefits to people needing care at home, in assisted living communities, and in skilled nursing facilities, says Jesse Slome, director of AALTCI.
According to the Association, leading causes for long-term care insurance claims include Alzheimer’s disease, stroke, arthritis, and cancer. Female policyholders account for roughly two-thirds of all long-term care insurance claims and benefit dollars. Home care accounts for half of all newly opened individual insurance claims. For more information, visit www.aaltci.org.
MassMutual Announces Record 2012 Financial Results
MassMutual announced strong financial results for 2012, including double-digit growth and record sales in key businesses, increased earnings, and unprecedented levels of statutory surplus and total adjusted capital. For the year ending 2012, sales of whole life insurance (the company’s core product) were up 26% from the prior year and saw the seventh consecutive year of record sales.
Retirement plan and services sales and deposits totaled $11.1 billion, up significantly from $6.2 billion in 2011 and the fourth consecutive year of record sales and deposits. Net gains from operations before policy owner dividends and taxes were up 22% from 2011. Net income soared to $872 million, nearly doubling from the prior year. Assets under management rose 15%, which is the highest reported in the company’s history. The company’s statutory surplus and total adjusted capital grew to record levels. These two factors are key indicators of financial strength. Michael Rollings, executive vice president and chief financial officer of MassMutual said, “The strong operating fundamentals of MassMutual’s core businesses, coupled with our enduring financial strength and excellent investment results, enabled us to produce remarkable results in 2012, including significant growth in earnings, sales, revenues, assets under management and cash flows.”
Advisor Optimism Soars
Penton’s WealthManagement.com Advisor Confidence Index (ACI) rose 8.4% in February 2013 to end at 109.7, the highest it has been since April 2012. The index is a benchmark of financial advisors’ views on the U.S. economy and the stock market. February marks the third month in a row that the index has climbed higher, since suffering an 11% decline in November, reflecting uncertainty surrounding the election and the resolution of the fiscal cliff. Since then, markets have climbed 10% and advisor confidence has rebounded.
“Clearly, the U.S. economy is mending. Home sales, employment, and confidence all look stronger. Expect a few bumps along the way, but the U.S. economy is forming a positive base. My outlook for 2013 and 2014 remains quite positive,” says ACI panelist William Green of GL Capital Partners.
All four components of the ACI experienced an increase in confidence over the prior month:
1. Economic outlook 5.2%
2. Six-month economic outlook 7%
3. 12-month economic outlook 18%
4. Stock market outlook 4.3%
Survey participants are clearly optimistic about the near-term future of the economy, but many think the recent market boom is being fueled more by federal stimulus spending than economic fundamentals. And while the near term may look positive, dangers lurk further out. ACI panelist Rick Horton of WealthPlan Advisors said, “As long as the Fed is artificially suppressing interest rates and treasury rates have seemed to hit bottom, money will flow to equities as it searches for yield. Once governments start printing money, they have a hard time giving it up. When the Fed announces that they no longer will suppress rates, then we should see a bubble of some sort in the bond and equity markets. Probably won’t happen for 24 to 36 months.” For more information, visit WealthManagement.com
LinkedIn Financial Insight Group for Advisors
Jackson National Life launched the Center for Financial Insight (http://www.jackson.com/thoughtleadership) for consumers, advisors, and Jackson employees. Jackson also launched The Alternative Investment Learning Center, which is a LinkedIn community for registered advisors. Examples of the content on the Center currently include: variable annuities, alternative investments, and social media for advisors.
Life Insurance
Genworth Financial launched ePolicy Delivery, which makes life insurance products quicker to close. It allows clients to receive their policies faster and agents to get paid faster. For more information, visit http://genworth.com.
The Tax Credit Deadline Is Approaching
California’s small businesses need to know whether they qualify for the healthcare tax credit under the Affordable Care Act. March 15 is the corporate tax-filing deadline. Small business owners may qualify for a credit for up to 35% of their health insurance premium costs. CPA and tax expert Conrad Davis of Crowe Horwath LLP, says that the credit is underutilized.
He notes that more than 375,000 small businesses in California are eligible for health insurance tax credits for a total value of more than $1.8 billion, according to a recent study by the Small Business Majority. Small employers that pay at least half of the premium for employee health insurance coverage may be eligible for the Small Business Health Care Tax Credit.To qualify, an employer must have fewer than the equivalent of 25 full-time workers, have average annual wages below $50,000, and pay for 50% or more of employees’ health insurance premiums.
For the 2012 tax year, the IRS is offering a tax credit that is worth up to 35% of a small business’ premium costs (25% for tax-exempt employers). In 2014, the credit increases to up to 50% (35% for tax-exempt employers) for coverage purchased through the state’s insurance marketplace, Covered California. Davis says it’s vital for small businesses to consult their tax advisors about this benefit as the law takes shape. For more information, visit www.HealthLawGuideforBusiness.org.
LAAHU University Day Set For May
The Los Angeles Assn. of Health Underwriters (LAAHU) University Day will be held May 22 at the Los Angeles Convention Center. The theme is “Countdown to 2014.” The event will focus on giving insurance professionals the training and tools they need to help California consumers and employers adapt to the ACA in the months and years ahead. Speakers include Dave Jones, California Insurance Commissioner, Peter Lee or Michael Lujan of Covered California, and Herb Schultz, Region IX director of HHS. For more information, visit www.laahu.org.
Autism Advisory Task Force Report
The Department of Managed Health Care (DMHC) has convened the Autism Advisory Task Force called for in Senate Bill 946. . The Task Force is charged with developing recommendations about medically necessary behavioral health treatments for people with autism or pervasive developmental disorder (collectively referred to as autism), and the appropriate qualifications, training and education for providers of such treatment.
The Task Force will focus on the following:
1. Scientifically validated interventions.
2. Patient selection, monitoring, and duration of therapy.
3. Qualifications, training, and supervision of providers
4. Adequacy of provider networks.
5. Requirements for providers to get licensed in the state.
The 18-member Task Force is includes researchers, providers, advocates, and experts charged with developing recommendations for state policy makers on behavioral health treatment for people with autism. The work of the Task Force will be grounded in evidence-based research about interventions that have measurable treatment outcomes. All Task Force meetings are open to the public. Information, including agendas, meeting schedules and informational materials are available on the DMHC’s website.
Members of the public may attend the Task Force meetings in-person or participate via phone by calling 800-309-2350. Task Force meetings are audio-recorded and posted on the DMHC’s website. For more information, contact autismtaskforce@dmhc.ca.gov
Jones Announces Emergency Regulation for Autism Coverage
The California Department of Insurance (CDI) filed an emergency regulation with the Office of Administrative Law (OAL) to address delays and denials of coverage for autism treatment in children. Commissioner Dave Jones said, “Many insurers are failing to comply with California law that mandates medically necessary treatment. This regulation will clarify insurers’ obligations to give these critical services.”
On October 13, 2011, Governor Jerry Brown signed SB 946, which reconfirmed the mandate for health insurers and HMOs to provide behavioral treatment for autism. This measure took effect on July 1, 2012.
The regulations would do the following:
• Prohibit visit limits on coverage.
• Prohibit dollar limits on coverage, unless they apply equally to all benefits under the policy.
• Prohibit denials or unreasonable delays for behavioral health treatment because of a claimed need for IQ testing; or because a treatment is deemed experimental, investigational, or educational.
For more information, visit www.insurance.ca.gov.
