The Drivers of Health Insurance Premium Changes for 2017

May 11, 2016 California Broker Magazine

HEALTHCARE

rising healthcare costsThe Drivers of Health Insurance Premium Changes for 2017
The American Academy of Actuaries offers an early look at what’s driving changes in premium in the Affordable Care Act (ACA) individual and small group markets. Academy Senior Health Fellow Cori Uccello said, “Increased health care costs and the end of the ACA’s transitional reinsurance program are two of the biggest factors pressuring rates higher. The one-year moratorium of the health insurance provider fee will partially offset these increases.”

The issue brief identifies the following factors that will affect 2017 premiums:

  • The underlying growth of health care costs: Although increases in health care spending are still relatively low, prescription drug spending is expected to increase faster than other medical spending.
  • The sun-setting of the ACA’s transitional reinsurance program: Each year, the gradual reduction in the reinsurance program has increased premiums. The final impact will occur in 2017 when projected claims are expected to increase 4% to 7% due to the program ending in 2016.
  • The composition of the risk pool and any changes in the assumptions used in premium calculations: Insurers will revise their assumptions for underlying 2017 premiums if enrollment levels, risk profiles, or claims are different than expected when they developed 2016 premiums.
  • The one-year moratorium of the ACA health insurance provider fee: This will lower premiums by 1% to 3%.
  • The repeal of the ACA’s original expansion of the small group definition, and modifications to provider networks: Premium changes for individuals will reflect increases in age, and changes in geographic location, family status, or benefit design. If a consumer’s plan was discontinued, the premium change will reflect the increase or decrease resulting from being moved into a different plan. Average premium change information (released by insurers or states) could reflect consumers moving to different plans when their plan was discontinued.

Read the issue brief at actuary.org.

ER Doctors Say that “Affordable” Premium Policies Mislead Patients
Ninety percent of emergency physicians say that health insurance companies mislead patients by offering affordable premiums for policies that actually cover very little, according to a survey by the American College of Emergency Physicians (ACEP). Ninety-six percent say that emergency patients don’t understand what their policies cover for emergency care. Eighty percent of ER doctors say they are seeing patients with health insurance who have missed or delayed medical care because of high insurance costs – a more than a 10% increase over six months ago.

Jay Kaplan, MD, FACEP, president of the American College of Emergency Physicians (ACEP) says, “Each day, emergency physicians are seeing patients who have significant co-pays for emergency care of up to $400 or more. It might as well be $4,000 for some people…Insurance companies must provide fair coverage…and be transparent about how they calculate payments. They need to pay reasonable charges, rather than setting arbitrary rates that don’t even cover the costs of care. Insurance companies are exploiting federal law to reduce coverage for emergency care knowing emergency departments have a federal mandate to care for all patients, regardless of their ability to pay. When plan reimbursements don’t cover the cost of providing services, physicians must choose between billing patients for the difference or going unpaid for their services. The vast majority of emergency physicians and their groups prefer to be in network.”

Dr. Kaplan says that health insurance companies are creating narrow networks of medical providers to increase profits, making it more likely for patients to go out-of-network. The survey of ER doctors also reveals the following:

  • 62% of ER doctors say that most health insurance companies provide inadequate coverage for emergency care visits.
    More than 80% of ER doctors who are aware of reimbursement issues agree that insurance companies have reduced emergency care reimbursements.
  • 60% of ER doctors say that, in the past year, they have had difficulty finding in-network specialists to care for patients with a quarter of them saying it happens daily.
  • 91% of ER doctors say that a new rule by the Centers for Medicare and Medicaid Services (CMS) would make it harder to find specialists and follow-up care for patients. The CMS rule exempts health insurance companies from meeting minimum standards to ensure adequate networks.
  • 79% of ER doctors who are familiar with the Fair Health database say it’s the best mechanism to ensure transparency and make sure that insurance companies don’t miscalculate payments.
  • 87% say that insurance companies should pay the in-network rate when an emergency patient does not have access to an in-network facility or physician.

Kaplan said, “Health insurance companies have a long history of not paying for emergency care and…discouraging their customers from seeking it. For example, United Healthcare was sued successfully by the State of New York for fraudulently calculating and significantly underpaying doctors for out-of-network medical services. They used the Ingenix database, which forced patients to overpay up to 30% for out-of-network doctors. The company, which, at the time, was led by the acting head of CMS, Andy Slavitt — paid the largest settlement to the state of New York and the American Medical Association. Part of that settlement created the Fair Health database.” For more information, visit ACEP.org.

It’s Gotten Harder for Hispanics to Afford Healthcare
An increasing number of Hispanics are finding it harder to afford healthcare. The percentage of those without health insurance is up slightly over a year ago, but a majority still have a favorable view of the Affordable Care Act (ACA). For the first time more women are insured than men, according to a new survey by the Florida Atlantic University Business and Economics Polling Initiative. “The increased healthcare costs compared to last year is probably making it harder for Hispanics to afford health insurance,” says Monica Escaleras, director of the Initiative.

More than 43% of respondents in the April poll say it is harder to afford healthcare, up almost 6% from a similar survey in March 2015. Only 13.7% say it’s easier, down more than 9% from last year. The number of uninsured increased 5%, from 7.8% in March 2015 to 12.8% last month. However, Hispanics have still benefited since the enactment of the ACA, resulting in 4 million adults gaining coverage, according to the Department of Health & Human Services’ March 2016 report. Hispanic women are increasing their access to health insurance through the ACA with 52% saying they have government healthcare coverage compared to only 23.3% of men.

According to an analysis by McKinsey & Company, premiums for the lowest-cost ACA plans are expected to increase 10% to 13% in 2016. More than half of the government-sponsored nonprofit insurance co-ops have failed, leaving more than 750,000 families and individuals scrambling for new health insurance. Fifty-one percent of Hispanics gave Obamacare a favorable rating, compared to 35% unfavorable. For more information, visit fau.edu.

Are Healthy Employees Unfairly Burdened?
The Affordable Care Act requires healthy employees to pay the same insurance premiums as their unhealthy coworkers, even though they account for a significantly lower proportion of their employer’s health care spending. Many see this imbalance as a ripoff, according to a video report by SelfHelpWorks.com. The following is a summary of the video report and comments by Lou Ryan, founder and CEO of behavior change firm SelfHelpWorks:

Health insurance costs have skyrocketed in recent years, reaching an average of $6,251 for single coverage in 2015 according to a Kaiser Family Foundation/HRET employer survey. Many employees feel the high insurance rates are a ripoff. The biggest cost driver is chronic disease, which accounts for 86% of the nation’s health care costs according to the CDC. As chronic disease creeps up in an organization its health care costs are driven upwards, resulting in higher premiums and fewer benefits for everyone.

Ironically, most chronic disease can be prevented or reduced by simply making healthier lifestyle choices. Yet the Affordable Care Act essentially requires employees of the same age and gender to pay the same rates regardless of health status. This penalizes employees who work at staying healthy, causing them to view their health insurance as a ripoff. Employers have implemented corporate wellness programs. But results are generally poor when it comes to creating sustained behavior change among those who need it most. While these people want to break free of unhealthy habits like junk food, tobacco or excess alcohol, the vast majority simply find it impossible to do so for any length of time. The problem is that the issue is not being tackled correctly, Behavior begins in the mind, not the body. To view the 3-minute video report, visit selfhelpworks.com and scroll to the bottom.

When Midsize Employers Offer HDHPs, 34% of Employees Elect Them
Thirty-four percent of employees who work for midsize employers would choose a high deductible health plan (HDHP) if given the choice, according to a report by Benefitfocus. Millennials over 26 are the most likely to opt in at 40%. Thirteen percent of employers offer at least one HDHP. Regardless of  whether the plan is a PPO or HDHP, employees face higher out-of-pocket costs. With rising copays and coinsurance, the average family could spend nearly 40% more on health care than on food in 2016. To close the gap, many employers are funding health savings accounts (HSAs) and flexible spending accounts (FSAs). Yet adoption is low at large and midsize companies. On average, eligible employees contribute less than half the maximum amount allowed. Shawn Jenkins, Benefitfocus CEO, said that employers will drive more choice and innovation in  benefits and in the plan selection process in order to attract and retain talent. He added that, as the market shifts toward consumer-driven health plans, employers must make make it a top priority to offer decision support, education, and financial wellness resources. For more information, visit benefitfocus.com.

Costs, Not Utilization Are Driving Children’s Healthcare Spending
In 2014, rising prices were largely to blame for the growth in children’s health care spending, according to a report from the Health Care Cost Institute (HCCI). Health care spending  for children under employer-sponsored plans grew 5.1% a year from 2010 to 2014, reaching $2,660 in 2014. But the use of health care services declined from 2012 to 2014. HCCI senior researcher Amanda Frost said, “The decline in children’s use of health care services is a relatively new trend…While we know that prices have fueled much of the spending growth in 2014, future research should examine whether these higher expenditures are leading to better health care outcomes for children.” The survey also reveals the following:

  • Out-of-pocket health care spending on children increased 5.5% a year to $472 in 2014. This growth was due partly to higher out-of-pocket spending on ER visits, which increased 11.7% annually.
  • The average price for brand prescriptions went from $7 a day in 2010 to $16 a day in 2014.
  • The rise in the average price of brand prescriptions drove spending increases. In 2014, spending for brand prescriptions rose 6.8%. The average price for generic prescriptions remained stable.
  • In 2010, the average price of a surgical admission for a child was $35,423, and jumped to $53,372 in 2014.
  • ER visits accounted for 8% of health care spending for children in 2014.
  • The average price of an ER visit increased $298 from 2010 to 2014. At the same time, the number of ER visits dropped from 181 visits per 1,000 children in 2010 to 177 visits in 2014.
  • In 2014, there were 3,228 doctor visits per 1,000 children, down slightly from the previous year.
  • Doctor visits accounted for 12% of spending in 2014 ($339 a child), and made up the largest share of health care spending for the average child.

For more information, visit healthcostinstitute.org.

First Patient Gets Health Coverage for a Powered Exoskeleton
ReWalk Robotics Ltd. announced that a commercial health insurance plan has determined that powered exoskeletons are medically necessary for patients with lower limb disabilities (under certain medical criteria). Jackson Larson of Cambridge, Minn is the first person to get health insurance coverage for a ReWalk system. A spinal cord injury in 2010 left him paralyzed from the waist down. The system allows independent, controlled walking similar to a natural gait pattern. It includes a wearable brace support, a computer-based control system, and motion sensors. Late in 2015, the Dept. of Veterans Affairs issued a national policy for the evaluation, training and procurement of ReWalk Personal exoskeleton systems for all qualifying veterans across the United States. ReWalk is the first exoskeleton in the U.S. to receive FDA clearance for personal use at home and in the community, as well as for rehabilitation settings. Larson said, “I know, first-hand, how much my health and well-being has benefited from use of the ReWalk system, and I feel that the new policy will allow a large number of users to experience these same benefits.” ReWalk Personal 6.0 is a wearable robotic exoskeleton that allows people with spinal cord injury to stand upright and walk.

IN CALIFORNIA

Insurance Commissioner’s Statement on Centene’s Acquisition of Health Net
California Insurance Commissioner Dave Jones issued a statement on Centene’s acquisition of Health Net. The following is a summary of his comments:

This transaction provides an opportunity to bring new capital and resources from a major national health insurer largely outside of California (Centene) to enable a California health insurer (Health Net) to continue to compete and offer consumers additional choices in California’s individual, small group, and large group commercial health insurance market. The conditions for my approval of this merger include the following:

  • Merger costs will not be imposed on California policyholders.
  • Health Net will maintain and grow its commercial line of business. There are growth commitments and investment requirements to ensure that Centene continues to invest substantially in Health Net Life and that both companies seek to expand Health Net Life’s present competitiveness in California’s individual, small group and large group health insurance markets.
  • Health Net Life will continue to offer products through Covered California.
  • Centene and Health Net must provide sufficient networks of medical providers and timely access to medical providers and hospitals.
  • Centene and Health Net must improve the quality of care delivered through their health insurance.
  • Health insurance rates will be developed using the same methodologies used before the merger, but with an agreement that rate increases will be kept to a minimum.
  • An adequate distribution channel for Health Net health insurance must be maintained.
  • Senior management for Health Net’s California operations must remain in California and restrictions are placed on Centene’s ability to re-domesticate or move Health Net out of state.
  • Centene will invest further in California by making a $200 million infrastructure investment by establishing a California call center, bringing new jobs to California.
  • Centene and Health Net will invest an additional $30 million in California’s low and moderate income

Health Net has had declining market share and covered lives in its commercial health insurance business. The merger with Centene gives Health Net access to the capital and resources to compete in a California market that’s dominated by three much larger health insurers (Kaiser, Anthem Blue Cross of California, and Blue Shield of California) and several other national health insurers (United Health Care, Aetna, Cigna).

Petersen Hires Regional VP
Petersen International Underwriters hired Todd Shield as a regional vice president of the firm. Shield previously worked at Assurity Life Insurance Company as manager of Disability Income Products. He is a nationally recognized personality of the disability insurance industry, and was elected the 2016 President of the International Disability Insurance Society. For more Information, call 800-345-8816 or email piu@piu.org.

Scan Educates People Transitioning from a Covered California Plan to Medicare
SCAN Health Plan is working with California Health Advocates to help people avoid financial penalties for failing to sign up for Medicare in time. The educational push targets people who are insured through a Covered California plan and are turning 65. Elaine Wong Eakin, executive director of California Health Advocates said that many people with a Covered California plan are not aware of what they need to do as they become eligible for Medicare. “Many continue with their Covered California plan and face penalties later. Unfortunately, there is no formal communication to these individuals – from their plan or from Medicare – letting them know the important steps they need to take.” Through a sponsorship by SCAN, California Health Advocates has developed a series of articles and a webinar. SCAN also works, year-round, to help consumers understand basic Medicare options through informal coffee chats. SCAN is hosting coffee chats in Los Angeles, Marin, Orange and Sonoma counties. To schedule a coffee chat, local organizations should call 562-997-3170.

DISABILITY

Americans Greatly Underestimate the Cost of Homecare
The average American underestimates the cost of in-home care by almost 50%, according to a Genworth study. Thirty percent say that home care costs less than $417 a month when the national median rate is $3,861 a month for an in-home aide or $3,813 a month for homemaker care. Homemaker costs are up 2.6% from 2015, marking the highest year-over-year increase across all care categories. In comparison, home care aide services rose modestly at 1.25% since 2015. Over the past five years, home maker costs have risen 11% and 6.6% for health aides.

Interestingly, people who stand to be affected most by long term care events are more likely to underestimate the cost of care. This includes women (who are more likely to enter caregiving roles), single adults (who may not have a partner to rely on for caregiving needs), and younger adults (aged 25 to 45), who are more likely to deal with the reality of a parent needing care).

The national median cost of care rose across all care settings, except adult day care, which decreased slightly. The monthly cost of a private nursing home room is $7,698, up 1.24% from 2015. The cost of a semi-private room is up 2.27% to $6,844 a month. Assisted living communities saw a slight increase in costs of .8% to $3,628 a month. Adult day care costs fell 1.25%. For more information, visit genworth.com/lets-talk.html.

 Individual Disability Market Sees Sales Growth in 2015
A Gen Re survey reveals that individual disability sales grew 2.3% in 2015, representing $4.9 billion in total in-force premium. That includes non-cancelable, guaranteed renewable, and buy/sell products. The survey also reveals the following:

  • Non-cancelable in-force premium increased 2% to $4.2 billion; guaranteed renewable in-force premium grew 4.5% to $620.6 million, and buy/sell fell 2.4% to $68.1 million.
  • Total new policies increased over 6%. Non-cancelable policies had the biggest impact on the total results increasing 7.5%.

For more information, visit genre.com.

LIFE INSURANCE & ANNUITIES

Life & Annuity Industry Sees Jump in After-Tax Earnings
The U.S. life insurance/annuity industry posted favorable after-tax earnings in 2015 despite low interest rates and soft equity markets. Earnings for the life insurance industry increased 6.7% year-over-year, according to A.M. Best. However, earnings are dampened by the low interest rate environment and a lack of substantial organic growth.

Pre-tax net operating earnings for the life/annuity industry increased 9.9% in 2015, reaching $54.9 billion. The results are lower than what was recorded in 2013 when the industry achieved a five-year high of $65.8 billion, but the 2015 results were solid and compared favorably to earlier years. A variety of factors drove improved earnings including increased pre-tax earnings in the ordinary life and group annuity and health product lines. A.M. Best says that the most beneficial environment would be a slow, steady rise in interest rates. Profitability should improve for life/annuity writers’ interest-sensitive books-of-business; that’s as long as interest rates move steadily higher without fast and steep rate spikes. For more information, visit ambest.com.

NEW PRODUCTS

MassMutual Introduces Mobile App for BeneClick! Benefits Exchange
MassMutual’s new BeneClick! Mobile App supports BeneClick!, the first benefit exchange that combines insurance protection, healthcare coverage, and retirement savings plans on a single platform. For more information, visit massmutual.com.

Individual Dental & Vision
Starmount Life Insurance is offering fully insured individual dental and vision plans. Multiple plan designs are available with different annual maximum options and a national dental network with more than 270,000 access points. An optional fully insured vision rider may be elected providing coverage for eye exams and eyewear and a national vision network including independent providers and retail chains. The Starmount plans are available for individuals age 19+ with no maximum issue age. Plans are underwritten and administered by Starmount Life Insurance Company. Benefits and availability may vary by state. For more information, contact Kellie Bernell at Kellie.Bernell@NGIC.com or 805-341-7843.

Retirement Plans with New Flexibility
The Guardian added 21 investment options to its lineup of retirement products. The additional options increase the breadth of asset classes for plan sponsors. The additions include the American Funds Target Date Retirement Series, and offerings from other fund families including American Century and T. Rowe Price. Natural resources, utilities, and sector funds from Dreyfus and Franklin Templeton have also been added. Each fund’s investment allocation gradually transitions from a growth-oriented approach to a more income-oriented focus as the fund approaches and passes its target retirement date. For more information, visit MyRetirementWalk.com.