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by Leila Morris

• California Exchange Plans Fall Short of Essential Health Benefits

• California’s Exchange Offers a Competitive Marketplace

• Covered California Reaches One Million Enrollment Milestone

• CAHU Capitol Summit

• New ACO in San Joaquin County

• CMS Backs Down on Medicare Advantage Drug Overhaul

• Health Reform Update

• The Majority of Employers Violate ERISA

• Uninsured Rate Declines for Children and Rises for Working-Age Adults

• Exchange Enrollment Expected to Fall Short of CBO Estimates

• Criminals Find A Juicy Target in Patient Records

• Young Adults Can Face 41% Narrower Income Range Subsidies

• Employers Out of Touch With Employee’s Benefit Needs

• Mergers & Acquisitions Declined in 2013

• Term Life

• Investable Private Equity Index


California Exchange Plans Fall Short of Essential Health Benefits

Those grandfathered health care plans aren’t the only ones that don’t meet the minimum standard for essential-health benefits under the Affordable Care Act, according to a study published in the February 2014 issue of The American Journal of Managed Care.

The study, led by Joshua P. Cohen, PhD, finds that health plan drug benefits in Massachusetts and California don’t meet state and federal requirements for essential health benefits, even though the plans in question were approved. These two states are of special interest to researchers, with Massachusetts being the incubator of this type of reform and California running the largest state-based exchange.

When researchers evaluated the plans against benchmark plans, they found that that health plans in both states are not fully compliant with state and federal rules. Cohen’s group found major plan differences in cost sharing, reimbursement criteria, prior authorization, and quantity limits.

Both states would need to adjust their formularies, with state policymakers taking another try at balancing competing aims of comprehensiveness of coverage and drug affordability. This gets to the heart of the balancing act involved in regulating healthcare. Mandates can drive up costs, but they also ensure that patients get the care they need. The key question for policy makers is how well an essential health benefit approach balances consumers’ desire for an affordable and comprehensive benefit package, while offering flexibility with respect to formulary benefit design and hence leverage for competitive pricing, according to the authors. For more information, visit http://www.ajmc.com.

California’s Exchange Offers A Competitive Marketplace

The California exchange market is shaping up to be more competitive than its 2012 individual market, according to a report by the Kaiser Family Foundation. All three indicators point to increased competition (the Herfindahl–Hirschman Index, market share of largest insurer, and number of insurers with more than 5% of market share).

California’s individual market was highly concentrated in 2012, but the exchange market has only moderate concentration. Eleven insurers are participating in California’s exchange throughout the state, including eight plans that previously made up 90% of the 2012 individual market.  Four new plans (L.A. Care Health Plan, Molina Healthcare, Western Health Advantage, and Valley Health Plan) are also being offered, but together only make up 5% of the exchange’s market.

Not all plans are available in all areas of the state. WellPoint, the parent company of Anthem Blue Cross of California and the state’s largest individual market insurer, has significantly less market share in the exchange than it did in the 2012 individual market (30% versus 47%).  Blue Shield of California picked up substantial market share, most likely because it was able to offer the lowest premiums in several parts of the state.

Over time, the availability of premium tax credits, which are only available inside exchanges, should greatly increase the number of participants.  If these new avenues for enrollment are more or less competitive, the markets are likely to be as well, according to researchers. For more information, visit .http://kff.org/health-reform/issue-brief/sizing-up-exchange-market-competition.

Covered California Reaches One Million Enrollment Milestone

One million people have enrolled in health care coverage in Covered California during the exchange’s first open-enrollment period, which ends March 31. Insurance plans are reporting that nearly 85% of enrollees have paid their premiums. The enrollment figures are well above the exchange’s highest projections last fall of 696,000 in the first six-month enrollment period. For more information, visit www.CoveredCA.com.

CAHU Capitol Summit

The CAHU Capitol Summit will be held in Sacramento May 20 to 21. For more information, visit http://www.cahu.org.

New ACO in San Joaquin County

Blue Shield of California, Hill Physicians Medical Group, and Dignity Health launched a three-year accountable care initiative to provide integrated, cost-efficient care to about 14,600 Blue Shield HMO members in San Joaquin County. About 10,300 of these enrollees are members of CalPERS. For more information, visit www.blueshieldca.com.


CMS Backs Down on Medicare Advantage Drug Overhaul

Responding to a storm of complaints from patient groups and a letter from 30 bipartisan Congressional representatives, the Centers for Medicare and Medicaid Services (CMS) backed down on a plan to overhaul drug coverage under the Medicare Advantage (Part C) and Part D prescription drug program.  The CMS’ proposed rule would have ended the protected status of antidepressants and immunosuppressant drugs (transplant drugs) starting in 2015 and anti-psychotic drugs potentially in 2016.

In a letter to Congress, CMS Administrator Marilyn Tavenner says that CMS now plans to only finalize proposals related to consumer protections (ensuring access to care during natural disasters), anti-fraud provisions that have bipartisan support (strengthening standards for prescribers of prescription drugs), and transparency (broadening the release of privacy-protected Part D data) after taking into consideration the comments received during the public comment period. Pharmaceutical Care Management Association (PCMA) president and CEO Mark Merritt said, “CMS was wise to reconsider its proposed Part D rule that would have destabilized the program, increased costs, and disrupted coverage for millions of seniors.”

Health Reform Update

The following is a health reform update written by Mark Hobraczk on behalf of
Patient Services Inc: A bipartisan deal to permanently fix Medicare physician payments appears to have unraveled after House Republicans insist on paying for it with a five-year delay in the individual mandate under the Affordable Care Act (ACA).

CMS extends the temporary pre-existing condition insurance plans created by the ACA for a third time, but insists it has no authority to delay the March 31 marketplace deadline or individual mandate enforcement.  Marketplace enrollment continues to accelerate but is not likely to meet initial projections, even with an expected late surge of enrollees.  Bipartisan opposition to proposed Medicare Part D changes forces CMS to withdraw the most controversial parts of the rule. For more information, visit patientservicesinc.org.

The Majority of Employers Violate ERISA

Seventy one percent of brokers surveyed by www.hr360.com say that their business clients don’t provide summary-plan documents or maintain plan documents, which are two major requirements of the Employee Retirement Income Security Act (ERISA). The following are top reasons brokers cited for employers not adhering to these two basic ERISA requirements:

They thought they were compliant by distributing benefit booklets/summaries.

They were not aware of the ERISA requirements.

It was too expensive, difficult, and time consuming to develop the documents.

Many companies assume that insurance contracts, certificates of insurance, and benefit summaries fulfill the ERISA requirements for a summary-plan document and plan document, but they don’t include the required or recommended provisions that protect the plan and the employer. Employers/plan administrators may be subject to the following serious penalties:

Failure to provide a summary-plan document or plan document within 30 days of receiving a request from a plan participant or beneficiary can result in a penalty of up to $110/day per participant or beneficiary for each violation.

Lack of a summary-plan document could trigger a plan audit by the U.S. Dept. of Labor (DOL).

As DOL has increased its audit staff, more small and large companies are being audited. For more information, visit www.hr360.com.

Uninsured Rate Declines for Children and Rises for Working-Age Adults

From 2008 to 2012, the percentage of children under 19 without health insurance declined from 9.7% in 2008 to 7.5% in 2012, while the percent age for working-age adults rose from 19.4%  to 20.8%. The health insurance statistics include two income categories that are relevant to recent changes in federal law. One category is families with incomes less than or equal to 138% of the poverty threshold. Eligibility for Medicaid was expanded earlier this year up to this threshold in participating states, i.e., those that allow Medicaid expansion. The second income category is new to the health insurance estimates this year: families with incomes from 138% to 400% of the poverty threshold. Under the law, these families can receive tax credits that will help them pay for health coverage contracted through the new health insurance exchanges.

“These new statistics on health coverage by income can be used as a baseline for policymakers and researchers studying the impacts of health care policy changes at state and local levels in the future,” said Lucinda Dalzell, chief of the Census Bureau’s Small Area Estimates Branch.

The study also includes these highlights:

• 68% of counties in the Northeast have an uninsured rate below 13% compared to only 2.5% of counties in the West.

• In every county, the uninsured rate for children under age 19 was lower than working-age adults, ages 18 to 64, except for four counties in Nevada, which saw no statistical difference.

• For the population younger than 65 living at or below 138% of poverty, non-Hispanic blacks had a lower uninsured rate than non-Hispanic whites in 34 states. Hispanics had a higher uninsured rate than non-Hispanic whites for every state but Hawaii, which was not statistically different.

Exchange Enrollment Expected to Fall Short of CBO Estimates

An analysis by Avalere finds that exchange enrollment is on track to reach 5.4 million by the end of March when open enrollment is set to end. That number falls short of Congressional Budget Office (CBO) estimates that six million people will enroll in exchanges in 2014. “The Administration is conducting aggressive outreach in March in an effort to boost enrollment.  However, success of exchanges in 2014 will depend less on the size of the market and more on the risk profile of enrollees,” said Caroline Pearson, vice president at Avalere Health.

As many as 4.2 million individuals had enrolled in exchanges through February. In comparison, when the Medicare Part D program began in 2006, 22% of voluntary enrollees signed-up in the final month of coverage. If exchanges follow the same pattern,  1.2 million people are expected to enroll in March.

In January and February, enrollment in federally run exchanges increased faster than enrollment in state-based exchanges, as federal exchanges recovered from early setbacks caused by Healthcare.gov. California, Florida, Idaho, North Carolina, and Washington lead the states in terms of enrollment. Meanwhile, the exchanges of Hawaii, D.C., and Massachusetts, which have struggled with website IT problems, trail the nation in enrollment. “In recent months, enrollment in federally run exchanges has caught-up to the initial enrollment surge in many state-based exchanges. The federal marketplaces have been fixed and now surpass some states in terms of ease of consumer access, eligibility, and functionality,” said Dan Mendelson, CEO of Avalere Health. For more information, visit avalerehealth.net.

Criminals Find a Juicy Target in Patient Records

Patient records have become a smorgasbord for criminals as millions of new patients enter the healthcare system, according to a study by Ponemon Institute. A key threat lies in the unproven security of the Affordable Care Act’s (ACA) health insurance marketplaces. Other top threats include criminal attacks, employee negligence, unsecured mobile devices (smartphones, laptops, and tablets), and third parties.

Patient records contain personally identifiable information and protected health information, which is controlled by federal laws, including HIPAA and GLBA, as well as numerous state breach notification laws.

Dr. Larry Ponemon, chairman and founder, Ponemon Institute said, “Employee negligence, such as a lost laptop, continues to be at the root of most data breaches in this study. However, the latest trend we are seeing is the uptick in criminal attacks on hospitals, which have increased a staggering 100% since the first study four years ago. The combination of insider-outsider threats presents a multi-level challenge, and healthcare organizations are lacking the resources to address this reality.”

Data breaches cost healthcare organizations $5.6 billion annually, slightly lower than past years. Ninety percent of respondents had at least one data breach over the past two years while 38% have had more than five data breaches in the same time period. The total number of data breaches in healthcare has declined slightly, indicating that healthcare organizations are making some progress, but the threats to patient data remain high. Many organizations are overwhelmed  with managing incidents and complying with multiple regulations.

Nearly 70% of respondents say the Affordable Care Act has increased the risk to millions of patients. The concerns include insecure exchanges between healthcare providers and government (75%), insecure databases (65%), and insecure websites for patient registration (63%). One-third of organizations surveyed say they do not plan to become a member of a Health Information Exchange (HIE); 72% are not confident or only somewhat confident in the security and privacy of patient data shared on HIEs.

Seventy-five percent of organizations say employee negligence is their biggest security worry. Eighty-eight percent of organizations allow employees and medical staff to use their own mobile devices to connect to networks or enterprise systems with access to patient information. Similar to last year’s study, more than half of organizations are not confident that employees’ mobile devices are secure. Yet, 38% of organizations don’t take steps to ensure these devices are secure or prevent them from accessing sensitive information.

Seventy-three percent of organizations are not confident or are only slightly confident that their business associates can detect a security incident, perform an incident risk assessment, or notify them in the event of a data breach. Only 30% are confident that their business associates are safeguarding patient information as required by the federal HIPAA final rule. Business associates that present the greatest risks to patient information are IT service providers, claims processors, and benefit management firms. Rick Kam of ID Experts said, “It’s like a bucket filled with water, with holes in it. The water keeps spurting out, and every time you patch one hole, a new hole forms. The process of patching old and new holes is overwhelming, and this new data validates that issue.” For more information, visit phiprotection.org.

Young Adults Can Face 41% Narrower Income Range Subsidies

An analysis by HealthPocket reveals that the ACA’s premium subsidy design may be contributing to the under-enrollment of young adults in the exchanges. Affordable Care Act subsidies are designed to lower premiums for people with incomes of 100% to 400% of the federal poverty level. However, the average maximum income at which young adults qualified for a premium subsidy was $31,744, which is less than 277% of the federal poverty level. Exchange benchmark premiums for younger people can fall short of the percentage of income necessary to trigger a subsidy. Also, the maximum income that qualified for a premium subsidy varied by $7,709 among the eight cities examined. The table below ranks the cities by the highest income where 18 to 34 year-olds were eligible for a subsidy.

Rank City

1 Philadelphia, Pennsylvania ($36,013)

2 Miami, Florida ($33,323)

3 Los Angeles, California ($32,858)

4 Atlanta, Georgia ($32,085)

5 Houston, Texas ($31,732)

6 Detroit, Michigan ($30,266)

7 Chicago, Illinois ($29,374)

8 Phoenix, Arizona ($28,304)

For more information, visit


Employers Out of Touch With Employee’s Benefit Needs

Employee satisfaction with benefits reached 50% in 2013 – the highest level since the MetLife’s study began over a decade ago. Employees who are very satisfied with their benefits are more than twice as likely to be satisfied with their jobs. Forty-four percent say that having customized benefits would increase their loyalty. Surprisingly, only 50% of employers cited voluntary benefits as a significant part of their benefit strategy in 2103 compared to 58% in 2012. The study also reveals the following:

• 78% of employees want more benefits to choose from and 80% want benefits customized to an employee’s circumstances and age.

• 60% are willing to bear more of the cost to have a choice of benefits.

• 40% are looking to their employer for more help in achieving financial security through employee benefits. This is up from 29% last year and illustrates the important role voluntary benefits can play in a benefit strategy

Todd Katz of MetLife said, “The employee satisfaction numbers make it clear that voluntary benefit strategies are paying off for employers and that attention should not be shifted from existing plans. Changing course now may have negative effects on loyalty and productivity.”

Employers report the following priorities in offering benefits:

• 87% say that employee retention is a very important benefit objective.

• 88% say cost control is a very important benefit objective, and 80% say that optimizing benefit plans to reduce costs is a most important strategy.

• 74% say cost is an important consideration when making benefit decisions.

Fifty-four percent of employers plan on maintaining the same benefit budget.

For more information, visit benefittrends.metlife.com.


Mergers & Acquisitions Declined in 2013

When it came to mergers and acquisitions, 2013 proved to be a weak year for the insurance industry, according to a study by Conning. Jerry Theodorou, an analyst at Conning said, “Mergers and acquisitions activity lagged in 2013 in all insurance sectors except distribution…The life-annuity industry aggregate deal value was off by almost half, due mainly to the slowdown in financial buyer acquisitions of annuity businesses. Health insurance transactions and deal values took a nosedive in 2013, as carriers turned from preparation for the Affordable Care Act to implementation activities in the year.”

Steve Webersen, director of research at Conning said, ”Private equity investors were again attracted to insurance technology and claims services businesses due to the high reported margins. Meanwhile, in the insurance distribution sector, 2013 insurance broker/agent transactions declined slightly from prior year, but aggregate deal value rose, again driven in large part by private equity participation.” For more information, visit www.conningresearch.com.


Term Life

AIG re-priced AG Select-a-Term, the highly customizable term life insurance issued by American General Life Insurance Company. Competitive improvements include up to 10% in premium reductions in popular durations and risk classes, and sometimes-higher reductions, and a market-leading position in 15-, 20-, 25- and 30-year term non-tobacco classes. For more information, visit www.aig.com/termlife.

Investable Private Equity Index

Thomson Reuters launched two new indices focused on the U.S. private equity buyout industry: The Thomson Reuters Private Equity Buyout Research Index and the Thomson Reuters Private Equity Buyout Index. For more information, visit http://thomsonreuters.com.

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