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by Leila Morris
CALIFORNIA
• California Exchange Pre-Registration Begins
• Covered California Signs Health Plan Contracts
• Torrance Agent Surrenders His License
• CAHU Health Care Summit Features Health Reform CE
HEALTHCARE
• Out-of-Pocket Limits Delayed to 2015
• Large Employer Slashes Spending with HSA Plan
• HHS Explains Tax Credit Income Verification
• Individual Medicare Market To Get a Boost
• HSA Assets Reach $18.1 Billion
• More Doctors Move Away from the Heath Insurance System
• Medicare Drug Coverage Doesn’t Ensure Easy Access to Meds
• Metabolic Conditions Drive Health Care Costs
• Uninsured with Pre-Existing Conditions Not Sure About Purchasing Insurance
MARKET UPDATE
• Consumers Who Go Direct Return To Independent Agents
NEW PRODUCTS
• Electronic Business Options for Life Policies
CALIFORNIA
California Exchange Pre-Registration Begins
Covered California is accepting online preregistration from licensed insurance agents who want to get training and certification to sell exchange plans. Preregistration allows Covered California to pre-qualify licensed agents for training and identify locations for the training needs of the agent community.
A two-part training program is mandatory for all agents who want to represent Covered California in the individual and/or small business marketplace. Training sessions will be held throughout the state beginning in September. Agents will be trained to provide in-person, one-on-one enrollment assistance for individual and small business markets in California.
Registration for agent training will begin August 19. Training will begin the first week in September in locations across the state. Computer-based training is scheduled to begin in November 2013. Covered California is working with CDI to get approval of its certification training for CE hours.
Covered California will not charge a fee for the certification training. However, there will be fees of about $60 to cover California Department of Insurance endorsement and administration costs.
There will be three components to the initial roll out of training:
1. An instructor-led training class.
2. Computer-based System training on CalHEERS.
3. A-computer based exam.
After passing the exam, agents will be contacted to sign the agent agreement, submit their E&O declaration page, and state payment data (similar to a W-9).
Covered California will offer marketing materials for Covered California to order or download. Certified insurance agents will be able to create their own marketing materials. However the material must be approved by Covered California.
Preregistration for licensed agents is available online at www.healthexchange.ca.gov/Pages/agents.aspx. For more information, visit www.healthexchange.ca.gov or call 877-453- 9198.
Covered California Signs Health Plan Contracts
Twelve health insurance companies will offer coverage in the state’s individual exchange, with six offering plans through the Small Business Health Options Program (SHOP) market as well. A 13th tentatively selected company, Ventura County Health Care Plan, opted out of the exchange in the first year.
The following companies will offer plans in Covered California’s individual market:
• Alameda Alliance for Health
• Anthem Blue Cross of California
• Blue Shield of California
• Chinese Community Health Plan
• Contra Costa Health Plan
• Health Net
• Kaiser Permanente
• L.A. Care Health Plan
• Molina Healthcare
• Sharp Health Plan
• Valley Health Plan
• Western Health Advantage
Covered California selected the following health plans to participate in SHOP:
• Blue Shield of California
• Chinese Community Health Plan
• Health Net
• Kaiser Permanente
• Sharp Health Plan
• Western Health Advantage
For more information on Covered California, visit www.CoveredCA.com.
Torrance Agent Surrenders His License
Former life insurance agent, Leonardo Joseph Bertucci, surrendered his license under a settlement with the California Department of Insurance. Department investigators allege that at least six California investors collectively paid over $1.5 million for worthless securities based on misleading advice from Bertucci. For about 10 years, Bertucci was involved in several investments involving the sale of unregistered securities.
In 2006, Bertucci began selling unauthorized annuities from the National Foundation of America, which claimed to be a charitable organization, but was, instead, an unregistered and unlicensed organization. In March 2013, a foundation executive was convicted of fraud following an FBI investigation. “We have zero tolerance for agents that do not honor their duty to accurately represent investment products and engage in dishonest or fraudulent practices. Vulnerable consumers, including seniors, depend on their agent to offer guidance when investing in insurance products. When agents misrepresent themselves it often results in the loss of substantial amounts of money, and in some cases someone’s life savings. We will investigate, revoke their license, and pursue criminal charges, when appropriate,” said Insurance Commissioner Dave Jones.The six investors were able to recover about 83% of their invested funds.
CAHU Health Care Summit Features Health Reform CE
Agents will be able to earn credits for the Certified Healthcare Reform Specialist designation at the CAHU Health Care Summit & Expo on October 23. The fee is $429 for the eight-hour course. People who sign up for the course get free expo registration. Alternate professional development sessions will be offered FREE to Health Care Summit attendees. For more information, email info@cahu.org.
HEALTHCARE
Out-of-Pocket Limits Delayed to 2015
by Michael Gomes, executive vice president, BenefitMall
The Obama Administration delayed the out-of-pocket cost limits that protect individuals and families to 2015. This delay gives health plans one more year to offer plans with more lenient out-of-pocket cost restrictions. These limits represent one of the most publicized insurance market reforms contained in the Affordable Care Act (ACA). The delay follows a string of recent announcements by the administration postponing portions of its signature health insurance reform law.
Delay Announced in February
The delay of out-of pocket limits for many health plans was explained in a February 2013 FAQ issued by the Department of Labor (DOL), but did not receive attention until recently, when DOL officials confirmed the delay. Since the passage of PPACA, DOL, as well as IRS and the Department of Health and Human Services (HHS) have often issued far-reaching decisions in FAQs. DOL, alone, has published 15 separate FAQ sections since PPACA’s passage answering a total of 137 questions.
Details of the Delay
PPACA restricts out-of-pocket cost limits, including deductibles and copays, at $6,350 for individuals and $12,700 for families. The one-year delay to 2015 allows some health plans to set higher limits, or no limit at all on some costs. Health plans can require enrollees to pay $6,350 for services like doctor and hospital services and another $6,350 for prescription drugs. A New York Times article notes that the delay on these limits is justified because employers and health plans use different companies to administer coverage. These companies often have separate computer systems for medical coverage and drug coverage that cannot communicate with each other. The delay gives these companies more time to upgrade their computer systems to accommodate the new federal requirements.
The following is the DOL FAQ that led to the delay:
Where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums under section 2707(a) or 2707(b), the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if both of the following conditions are satisfied:
a. The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
b. To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).
This statement essentially means that a consumer may have to pay the maximum out-of-pocket costs for major medical care and then pay the same maximum costs for prescription drug coverage.
Effect of the Delay
One immediate impact of the delay is the extra costs it will impose on Americans with chronic illnesses, disabilities, or unexpected health conditions. Prescription drugs and medical treatments for conditions like cancer, diabetes, and multiple sclerosis can cost tens of thousands of dollars a year or more. The limit on out-of-pocket costs was supposed to prevent individuals from having to bear large portions of these costs. This delay will, at least through 2014, compel many Americans to continue paying for these treatments.
Despite the close attention being paid to implementation of ACA, it is impossible to grasp every aspect of the law’s enforcement. As a result, this provision has gone almost unnoticed for the past six months. With the hundreds of FAQs, dozens of regulations, and all other relevant information regarding the ACA’s implementation, questions remain about what other provisions of this law have escaped the notice of the health care industry and the public at large. For more information, visit www.benefitmall.com or www.HealthcareExchange.com.
Large Employer Slashes Spending with HSA Plan
A large Midwestern employer reduced health care spending by 25% in medical, pharmacy, and total-claims categories during the first year of it’s HSA/high-deductible health plan. The full-replacement HSA plan allowed the employer to reduce aggregate health care spending by $527 per person. Spending on laboratory services declined 36% while spending on prescription drugs decline 32% in the first year, according to a study by the Employee Benefit Research Institute. While cost savings were greatest in this first year, savings continued over the next three years. Only pharmacy and laboratory spending were statistically significantly lower throughout the entire four years after the HSA plan was adopted. For more information, visit www.ebri.org.
HHS Explains Tax Credit Income Verification
The Dept. of Health and Human Services is explaining how it will verify whether a person’s income makes them eligible for a premium tax credit and cost-sharing reductions. The exchanges will use tax filings and Social Security data to verify household income. In many cases, they will also use current wage information that is available electronically. If Equifax data does not substantiate the inputted information, the exchange will request an explanation or more documentation to substantiate the applicant’s household income.
For 2014 only, HHS will allow an exchange to request more documentation from a statistically significant sample under the following circumstances:
• When the exchange has IRS data.
• The application filer inputs projected annual household income that is more than 10% below IRS and SSA data.
• Equifax data is unavailable.
• The individual does not provide a reasonable explanation for the inconsistency between the attestation and IRS and SSA data.
Individual Medicare Market to Get a Boost
Many employers are sourcing post-65 retiree health care coverage through the individual Medicare plan market or are considering doing so, according to a survey by Aon Hewitt. The ACA is causing more than 60% of employers to reassess their long-term retiree health strategies.
More than 40% companies that have decided to change their strategy for post-65 retirees are now directing retirees to the individual market for coverage, often accompanied by a defined contribution subsidy. More than half of companies that expect to change their post-65 retiree strategies indicate strong interest in this approach.
Maureen Scholl, CEO of Health Care Exchanges for Aon Hewitt said, “Individual market-based retiree health care sourcing strategies can create significant savings opportunities for all stakeholders. We expect to see many employers apply these strategies where possible and supplement them with modified group-based programs for those retiree populations where individual strategies do not make sense.”
Fifty-three percent of employers have altered or their Medicare Part D benefit strategies or plan to do so. Thirty-six percent of companies that have made changes, since 2010, have moved to a group-based Medicare Part D plan and another 21% anticipate doing so.
In 2013, 48% of of employers filed to collect the federal Medicare Part D Retiree Drug Subsidy compared to 63% in 2010. Only 18% plan to file for the subsidy longer-term. Milind Desai, retirement actuary at Aon Hewitt explained that employees had the impetus to take action with the elimination of the tax-favored status of the Retiree Drug Subsidy for 2013 and ACA-prescribed improvements to the Medicare Part D program. While many employers will continue to rely on group-based sourcing, they are likely to migrate toward more cost effective sourcing, he said.
Only 34% of employers offer local/regional or national group-based Medicare Advantage plans, and just 6% consider Medicare Advantage to be a viable group-based strategy. However, 38% of employers say they would consider replacing their group-based Medicare medical indemnity supplement strategies with a national Medicare Advantage PPO if there would be no change in retiree benefits and if it would generate near-term savings.
John Grosso, leader of Aon Hewitt’s Retiree Health Care task force said, “While ACA introduced a number of changes to the Medicare Advantage program, employers generally want to see consistent performance over time and a stable federal funding commitment before investing in these group-based strategies for the long-term.”
Some settlement strategies with a retiree benefit buy-out enable employers to eliminate their retiree medical commitment completely or in part. Employers are considering the following strategies: purchasing life annuities to provide a fixed income stream in lieu of ongoing medical coverage, establishing and funding a VEBA trust to support continued retiree benefits, or making direct cash lump-sum payments to retirees.
More than a quarter of companies say they would consider a retiree health care settlement strategy for all or a portion of their retiree group if it were cost-effective. Desai said, “We saw tremendous pension settlement activity during 2012, and that trend is continuing in 2013. Companies looking to shrink benefit liabilities…can explore…settling their retiree health care obligations as well…There are a number of tax, legal and market hurdles that limit the feasibility of settling retiree medical program commitments in a cost-effective manner, but this can change in the future.” For more information, visit www.aonhewitt.com.
HSA Assets Reach $18.1 Billion
HSAs have grown to an estimated $18.1 billion in assets representing over 9.1 million accounts at mid-year 2013. That’s a year-over-year increase of 29% for accounts and assets, according to a survey by Devenir. The survey data was collected in July 2013 from the top 50 HSA providers in the health savings account market.
The following are key findings:
• The average account balance grew from $1,879 at the end 2012 to $1,981 halfway through 2013. When you eliminate identified zero balance accounts, the average rises to $2,228, which is almost a 3% year-over-year increase.
• Total contributions to HSA accounts from reached $16.7 billion, with accountholders retaining about 23% of those contributions.
• HSA investment assets reached $2 billion in June, up 14% from the end of 2012 and 26% year-over-year. The average investment account holder has a $10,484 average total balance (deposit and investment account).
“Both employers and employees contributed record amounts to HSAs over the last year, with large employers, in particular, making significant contributions to their employee’s HSA accounts in an effort to help drive adoption,” said Jon Robb, vice president of Research at Devenir.
Devenir projects that, by the end of 2013, the HSA market is likely to approach $20 billion in HSA assets held among 10+ million accounts. HSA investment dollars are projected to grow rapidly as the balances of HSA users become larger, with estimates of investment assets doubling by the end of 2015. For more information, visit www.devenir.com.
More Doctors Move Away from the Heath Insurance System
Reports from across the country reveal a growing trend of practicing physicians and surgeons switching to direct pay models. Direct pay, independent practice models allow healthcare professionals to deal directly with patients and bypass the constraints of third-party payers, according to a report by The Minnesota Physician-Patient Alliance. Physicians say the direct-pay practice allows them to slash medical care prices in half or more because they have significantly lower overhead when they don’t have to deal with insurance paperwork. More time with patients is another important benefit cited by doctors who have transitioned to direct-pay. For more information, visit http://AAPSonline.org/mn.
Medicare Drug Coverage Doesn’t Ensure Easy Access to Meds
Consumers with traditional Medicare and Medicare Advantage plans face various hurdles in getting their medications, according to an analysis by HealthPocket. Some plans cover more than twice the number of drugs as do other plans. For 16% of drugs, plans limit the quantity that members are allowed to purchase at one time; 18% of drugs requir prior authorization; and nearly 2% requir step therapy in which a member must first try a less expensive medication. Steve Zaleznick of HealthPocket said, “Annual enrollment is coming up in October…The first step…is to ensure that the drugs they take are on the plan’s formulary, and the second is to look at what restrictions they can face in actually getting the medication in hand.”
Each Medicare plan has a formulary, which lists the drugs that are covered and the consumer’s out-of- pocket costs for those medications in a given year. A consumer would have to pay the full cost of a drug that’s not on the formulary. Plans can restrict access to drugs that are on the formulary by limiting the quantity, requiring prior authorization, and mandating step therapy.
Kaiser plans have no quantity limits or step therapy rules and only 3.5% of its drugs are subject to prior authorization. This model can prove useful to industry and government for new and reformed Medicare and private plans that come online through the Affordable Care Act, according to the analysis. For more information, visit www.HealthPocket.com.
Metabolic Conditions Drive Health Care Costs
Metabolic conditions lead to decreased employee health and productivity, and increased disability and medical care costs. About a third of employees have at least one condition-obesity, high blood pressure, high cholesterol, diabetes-that can contribute to metabolic syndrome, according to a report by the Integrated Benefits Institute (IBI).
People with metabolic syndrome are three times more likely to have a work-disabling event, such as a heart attack or stroke. “Employers stand to benefit from understanding the extent of metabolic conditions in their workforces and helping employees prevent, treat, and manage their underlying health risk,” said Thomas Parry, PhD, IBI president. No single condition causes Metabolic syndrome. It involves a combination of underlying conditions.
The following are key findings of the report:
• About one-third of employees have at least one metabolic condition. That means that, for every 100 workers, metabolic conditions will cost employers about $87,500 a year. Lost work time comprises 57% of the cost of metabolic conditions or $49,900 for every 100 employees.
• The cost of presenteeism-or under-performance at work due to illness-is roughly equivalent to the medical costs for treating employees’ chronic metabolic conditions.
• Annually, it costs employers $37,600 per 100 employees to medically treat metabolic conditions; employees who under-perform due to illness cost $35,300 in lost productivity.
• Sick days and work-disability days-or lost work time associated with days away from work-comprise 17% of the cost of chronic metabolic conditions.
• Interventions that target smoking cessation, nutrition, and exercise-are good starting points to manage the full cost of metabolic conditions.
* Drug therapies can also be helpful in lowering cholesterol, and managing blood pressure and diabetes.
For more information, visit www.ibiweb.org.
Uninsured with Pre-Existing Conditions Still Not Sure About Purchasing Coverage
Almost seven in 10 uninsured Americans with pre-existing conditions have not decided whether to purchase health insurance, according to a report by InsuranceQuotes.com. The Affordable Care Act will allow people with pre-existing conditions to purchase health insurance at no extra cost in 2014. The ACA mandates that all Americans have health insurance next year or pay a fine.
However, only 18% of uninsured Americans with pre-existing conditions are definitely planning to purchase health insurance (12% before Jan. 1 and 6% after that date). Fourteen percent are planning to remain uninsured while the others are undecided. Thirty-seven percent of the uninsured population has a pre-existing condition.
Laura Adams, senior insurance analyst of InsuranceQuotes.com said, “Many observers are worried that healthy Americans won’t sign up for health insurance next year. This research suggests that we should also be worried about unhealthy Americans failing to enroll.”
The report also found that 85% of Americans don’t think consumers have received enough education about Obamacare. Sixty-nine percent say they don’t feel that they have enough information to understand how the law will affect their finances. For more information, visit http://www.insurancequotes.com.
MARKET UPDATE
Consumers Who Go Direct Return to Independent Agents
Most customers who are lured away from independent agents by direct insurers with promises of lower prices end up returning to agents, according to a recent study commissioned by The Hanover Insurance Group. Nearly 60% of consumers who had purchased insurance through a direct channel 10 or more years ago said they switched back to an independent agent because they wanted more value.
Most consumers who switched back to independent agents were looking for the expertise and convenience that an agent can provide. Consumers also cited the benefits of having a single point of contact to handle their insurance needs and questions and having guidance from an insurance professional. For more information, visit www.hanover.com.
NEW PRODUCTS
Electronic Business Options for Life Policies
Lincoln Financial Group is offering an e-ticket system for its hybrid life insurance policies, and an e-delivery promotion for its life insurance and hybrid life insurance policies. Both enhancements provide streamlined transaction capabilities and more efficiency to help producers process business faster and easier. The enhancements expand Lincoln’s e-business capabilities, which also include the recently launched iPipeline iGO app. The app enables financial professionals to complete and submit Lincoln universal life, survivorship, and term life insurance applications electronically For more information, visit www.LincolnFinancial.com, call 860-466-1324, or e-mail Jay.Russo@LFG.com.