May 23 – by Leila Morris
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IN CALIFORNIA
• Stop California Lawmakers from Eliminating Self Insurance for Smaller Employers!
• Groups Mobilize Against Rate Regulation
• Dental Plan Conference to Feature Talk on Exchanges
HEALTHCARE
• Tax Credit is Too Small to Motivate Employers to Offer Coverage
• Rising Provider Fees Drive Health Care Inflation
• Drug Non-Adherence Costs Billions
• Oncologists Report Crucial Shortages of Cancer Drugs
• Annual Growth Rates in Health Care Costs Change Little
LIFE INSURANCE
• Life Insurance Prospects Are Not Being Approached
FINANCIAL PLANNING BENEFITS
• Employers Continue to Offer Defined Benefits to New Hires
NEW PRODUCTS
• Long-Term Care Cost Projector
• Health Exchange Solution
• Mobile Vision Plan Access
• Benefit Enrollment
• Fee Disclosure 408(b)(2) Solutions
IN CALIFORNIA
Stop California Lawmakers From Eliminating Self Insurance for Smaller Employers!
from Advanced Benefit Consulting
Senate Bill 1431, as written, virtually eliminates the option to self-insure for smaller employers by imposing a minimum specific stop loss of $95,000 and an aggregate of $19,000 per individual for groups with fewer than 50 employees in California. These limits are far too much risk for a smaller employer. Even those currently self-insured are at risk.
This bill, we feel, attempts to eliminate self-insured health plans, and is, in our opinion, in violation of ERISA. Please help us, along with the Self Insurance Institute of America, CAHU, NAIFA, IABA West, the California Chamber of Commerce and others in the fight to defeat this horrible bill for employers. Help us help employers in California to protect their right to have reasonably priced health insurance options outside of the soon to be operating California Exchange!
An Urgent Call to Action
by Mark Reynolds, RHU California
SB 1431 has passed the Senate Appropriations committee so we need to kick up the opposition. We are ready to release to you our modified web page designed to help us all battle SB 1431. We need to work together to get the word out. I want to explain a bit about the page and ask you to forward the link to all of your staff, all of your clients, all of your relatives, all of your friends and basically everyone and anyone. Remember, small employers need you to carry this fight. The California economy is shaky at best and recent announcements by the Governor’s Office project more budget cuts of an even deeper nature. Now is not the time to pile on extra premium costs to small employers, nor is it a time to restrict small employers from the choice of self-funding their group health plans. Experts predict that PPACA will force rates up another 40% by 2014. SB 1431 would eliminate the small employer’s ability to fight off those increases. Here’s how the website works:
Go to defeatsb1431.com. You will see a home page that has eight buttons to help you generate letters to California legislators. The website also includes talking points, descriptions of the bill, a copy of the bill, and the ability to send e-mails.
The site includes multiple letters for users, including three for brokers, three for employers, and two for employees and citizens. This allows everyone to send more than one letter. Each time you send a letter, it will be e-mailed to every California Senator, every California Assembly Member, and the Governor. You can customize each letter. This is a private site, so your e-mail addresses will not be saved nor shared. The text of the letters is available on the home page if you wish to extract the letters to modify and send through your own e-mail systems.
Please send more than one letter. Ask your clients to do the same.
Note: When you preview your email, it will look as though the legislator’s address is incomplete. Don’t worry; the program will add the members’ capital address to each e-mail.
If we show the Governor’s Office that SB 1431 is bad for small employers, maybe the Governor will veto the bill should the bill get that far. But let’s stop SB 1431 from reaching the Governor’s desk by sending thousands of e-mails to the Governor and to every California State Senator and Assembly Member. Most Legislators just do not realize how detrimental SB 1431 is to the cost of healthcare for small employers. Let’s help them understand. Thanks for your help. Together we can make a difference.
Groups Mobilize Against Rate Regulation
Doctors, physician groups, hospitals, health care providers, and business groups responded as Consumer Watchdog submitted signatures to qualify a health insurance rate regulation ballot measure for the November 2012 ballot. Californians Against Higher Health Care Costs says that it is opposing the initiative for the following reasons:
It gives one politician, beholden to special interest campaign contributions, too much power over health insurance.
It creates an expensive and duplicative state bureaucracy that will be paid for with higher health insurance premiums.
It does nothing to address the underlying costs driving health care premiums.
It lines the pockets of the proponents who created a new loophole allowing them to file more frivolous lawsuits and collect millions in fees.
Don Crane, President and CEO, California Association of Physician Groups said, “We all agree that controlling health care costs is critical, but this flawed measure will do nothing to address the underlying costs driving health care premiums and will ultimately limit patients’ access to care.”
Opponents charge that the initiative would “create a new funding stream for Consumer Watchdog and its band of trial lawyers to pocket millions of dollars at patients’ expense; they wrote the initiative to include lucrative financial rewards to lawyers for filing unnecessary legal challenges.”
Early opponents of the proposed initiative include the California Medical Association, California Hospital Association, California Association of Physician Groups, California Chamber of Commerce, Small Business Action Committee, California Citizens Against Lawsuit Abuse, California Association of Health Plans, Hospital Association of San Diego and Imperial Counties, Hospital Association of Southern California, Hospital Council of Northern and Central California, Civil Justice Association of California, Southwest California Legislative Council, Palm Desert Area Chamber of Commerce, Greater Fresno Area Chamber of Commerce, Imperial County Medical Society, Santa Clara County Medical Association, Redwood City-San Mateo County Chamber of Commerce, the Association of California Life and Health Insurance Companies and more. For more information, visit www.StopHigherCosts.com.
Dental Plan Conference to Feature Talk on Exchanges
The national movement toward health insurance exchanges and the role of “private exchanges in a public exchange world” will be the topic of a presentation by Ron Goldstein, president and chief executive officer of CHOICE Administrators, at the California Association of Dental Plans’ annual conference on May 31 in Indian Wells.
The Patient Protection and Affordable Care Act mandates that all U.S. states and territories establish and launch their own health insurance exchange by January 1, 2014, or default to a federal fallback program.
At the CADP conference, Goldstein will share how he sees the marketplace evolving over the next year with a perspective of more than two decades as a leading architect in the creation and acceptance of employee-choice health plans. He will also discuss the role and future of private exchanges within the context of healthcare reform. “Notwithstanding the Supreme Court decision on the individual mandate, employers and individuals will still be looking for a vehicle that provides affordable health insurance that meets their needs while providing choice and security. For many, both public and private health insurance exchanges may be the answer,” said Goldstein.
CADP’s 23rd Annual Conference will be held at the Renaissance Esmeralda Resort & Spa in Indian Wells. For more information, visit www.caldentalplans.org.
HEALTHCARE
Tax Credit Is Too Small to Motivate Employers to Offer Coverage
The Small Employer Health Insurance Tax Credit is too small to motivate employers to offer health insurance, according to employers, tax preparers, and insurance brokers who met with officials at the General Accountability Office (GAO). According to GAO’s findings, another factor limiting the credit’s use is that most very small employers do not offer health insurance (83% by one estimate).
While 170,300 small employers claimed the credit for tax year 2010, estimates of those eligible ranged from 1.4 million to 4 million. Most claims were limited to partial rather than full percentage credits (35% for small businesses) because of average wage or full-time equivalent requirements.
In addition, the state premium average limited the base premium in 30% of claims. Complex rules on full-time equivalents and average wages also limited use. Tax preparer groups told the GAO that the time needed to calculate the credit deterred claims.
The GAO, which is the investigative arm of Congress, found that IRS instructions don’t address eligibility requirements for employers with non-U.S. addresses. Also, the IRS instructions don’t give as much detail on the eligibility of health insurance plans for tax-exempt entities’ as they do for small business plans.
The GAO says that the following options could address these issues:
Expand eligibility requirements and have trade-offs, including less precise targeting of employers and higher costs to the Federal government.
Have the IRS improve instructions to examiners working on cases on the credit.
Have the IRS analyze results from examinations of credit claimants to identify and address any errors through alternative approaches.
The IRS agrees with GAO’s recommendations. For more information, visit http://www.gao.gov/assets/600/590832.pdf
Rising Provider Fees Drive Health Care Inflation
The rising price of health care was the chief driver of health care costs for privately insured Americans in 2010, according to a report by Health Care Cost Institute (HCCI). Per capita spending on inpatient and outpatient facilities, professional procedures, and prescriptions drugs rose 3.3% for beneficiaries under 65 with private, employer-sponsored group insurance.
This 3.3% increase follows spending increases in 2008 (6%) and 2009 (5.8%). Hospital prices rose 5.1% and ambulatory care facility prices rose 10.1% in 2010. Increases in facility prices were offset by decreases in the number of inpatient admissions (3.3 %) and use of outpatient facilities (3.1%).
Prices for the privately insured grew more than utilization after accounting for changes in the mix of medical services provided in hospitals (0.7%) and outpatient facilities (4.6%).
Per capita spending on health care services averaged $4,255 in 2010, which is a 3.3% increase from 2009. Per capita expenditures varied, with $8,327 paid for people aged 55 to 64 and $2,123 for people under 18. Per capita spending among people 18 and under grew faster than any other age group under age 65. Health spending increased 2.5% among people with employer-sponsored group insurance.
Out-of-pocket per capita spending increased 7.1% to $689. Cost sharing rates remained relatively stable among payers and beneficiaries, with beneficiaries contributing 16.2% of average per capita spending.
The average facility price for a hospital stay was $14,662, which is a 5.1% increase over 2009. The price for an emergency room visit climbed to $1,327 – an 11% hike. The average out-of-pocket price of a hospital stay rose 10.7% from $632 in 2009 to $700 in 2010.
Prescription drug prices grew 3% from an average of $80 per prescription in 2009 to $82 in 2010. Brand name drug prices increased 13% from 2009 to 2010 while generic drug prices decreased 6.3%. The price of professional procedures, including doctor visits, lab tests, and diagnostic imaging, increased 2.6%. Payments for office visits to primary care and specialist providers increase more than 5%.
The use of health care services declined more than 5% for medical inpatient admissions, emergency room visits, primary care provider office visits, and radiology procedures. On average, each insured person filled more than nine prescriptions in 2010. The number of brand name prescriptions dropped nearly 4% while the number of generic prescriptions increased 2.5%.
In future reports, HCCI will examine cost and utilization trends in areas such as mental health and substance abuse, cancer, and diabetes. For more information, visit http://www.healthcostinstitute.org/report
Drug Non-Adherence Costs Billions
Last year alone, prescription non-adherence led to more than $317 billion of avoidable medical costs, according to the Express Scripts 2011 Drug Trend Report. Eliminating non-adherence could save enough to cover the cost of healthcare for nearly 45 million uninsured Americans, according to the report.
Thirty-six percent of plan sponsors said the greatest concern in managing their prescription plans are rising utilization and rising costs of specialty medications. Another 38% cited drug costs, in general. Fifty-eight percent of plan sponsors with over 25,000 members cite rising specialty costs as their greatest concern, compared to just 24% of those with fewer than 5,000 members.
Plan sponsors are rapidly adopting new media tools to communicate with members. Seventy percent use online tools and mobile apps to help members make more cost-effective healthcare decisions and 84% intend to use them in the next two years. Plan sponsors say traditional member communications, while widely used, are not as effective.
In each of the five national peer surveys, at least 90% respondents agreed that home delivery has clear cost and convenience advantages over retail pharmacies. The mail channel is perceived to have an advantage over retail in maximizing use of generics (55% to 9%), improving adherence (41% to 21%), reviewing prescriptions (41% to 23%), and dispensing safely (35% to 7%). These advantages have led plan sponsors to promote home delivery.
Eighty-one percent of plan sponsors intend to offer a wellness plan in the next two years. At least three-quarters intend to use integrated data programs, in the next two years, to support their wellness initiatives. For more information, visit www.9trendsreport.com/pr.
Oncologists Report Crucial Shortages of Cancer Drugs
Ninety-one percent of oncologists surveyed by MDLinx reported shortages of key cancer drugs in their practices. The combination of shortages, insurance limitations, and financial pressures has some patients looking outside the system. “One in 10 of our responding oncologists reported that they had experienced desperate patients going into the grey market to find cancer meds…The NY Times reported prices up to 650% of normal. These drugs may be less effective or even counterfeit,” said Stephen Smith, chief marketing officer for MDLinx.
Sixty-seven percent of the doctors said patients are rationing medications or forgoing treatment because of financial and insurance coverage concerns. Treatment of some of the most common cancers may be affected by the shortage, including cancers of the breast, prostate, lung, and head & neck, as well as various leukemia and lymphomas. The most frequently mentioned drug in the April poll was doxorubicin. Cytarbine and methotrexate were the next two most commonly named drugs in short supply.
Forty-two percent of oncologists say they are concerned about the safety of imported cancer drugs that the FDA has approved on an emergency basis. For more information, visit www.mdlinx.com.
Annual Growth Rates in Health Care Costs Have Changed Little
The average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased 5.68% over the 12-months ending March 2012, according to the S&P Healthcare Economic Indices. This is a modest decline from the 5.72% rate posted for February 2012.
David M. Blitzer, chairman of the Index Committee at S&P said, “In March, five of the nine indices we publish saw deceleration in their annual growth rates…While this series has seen some volatility in recent months, there has been a significant decelerating trend over the past 12 months. It is the only one of the nine indices we publish where annual rates are below where they were in March 2011…Annual rates of change in Medicare costs are the lowest among the nine indices we publish. On the flip side, Professional Services Commercial insurance plans saw the fastest acceleration in March; their annual rate of change was 6.88%, up 0.15% over February’s rate,” he added. For more information, visit www.healthcareindices.standardandpoors.com.
LIFE INSURANCE
Life Insurance Prospects Are Not Being Approached
One main reason that many people don’t have life insurance is that carriers have not invited them to purchase their products, according to a Deloitte survey of life insurance buyers. Also, insured people who say they are open to buying additional coverage have not been solicited by carriers.
A significant number of respondents say they don’t know whether they need life insurance or how much to buy. Others want life insurance, but say they can’t afford it, which means that cost-conscious prospects might purchase a policy if they were aware of the price and value of coverage, according to Sam Friedman, insurance leader for Deloitte Research. He added that even many people who purchased life insurance don’t recognize many of the financial needs life insurance can fulfill, such as a source of cash in retirement, a way to save money for financial emergencies, or a way to help finance a child’s college education.
The following are other key findings from the survey:
33% do not have coverage because no one has offered to sell them a policy.
70% of those who purchased life insurance and 45% of those who have not say its among their top five financial priorities.
A significant number of respondents intend to buy new or additional insurance in the next two years.
Older prospects are harder to persuade with solicitations.
The youngest respondents find the application and underwriting process to be much more onerous than do older consumers.
Financial triggers and familiar life events are very significant factors in the decision to buy life insurance. Yet, many respondents don’t think of permanent life insurance as a more comprehensive, longer-term financial planning solution because they don’t understand its broader roles and benefits.
For more information, visit www.deloitte.com.
FINANCIAL PLANNING BENEFITS
Employers Continue to Offer Defined Benefits to New Hires
Sixty-eight percent of U.S. employers that still offer defined benefit pension plans are committed to providing them to new hires, according to a survey by Towers Watson. In addition, employers are adding features to their defined contribution plans that mirror defined-benefit designs. The goal is to help close possible savings gaps created by the shift to defined-contribution plans.
The Towers Watson survey is based on a survey of 424 midsize and large employers with defined benefit plans. Support for defined-benefit plans is strongest at companies that cover the most participants: Among the largest 10th percentile of respondents, 45% still offer a defined-benefit plan to new hires.
Alan Glickstein, a senior retirement consultant at Towers Watson said, “Despite a vastly changed landscape for retirement plans, the fact that many employers remain committed to defined-benefit plans is encouraging, especially since it is more difficult for employees to rely on a defined-contribution plan as an effective stand-alone retirement plan.”
When asked why they are committed to offering a defined-benefit plan to new hires, 71% cited promoting employee attraction and retention as the key reason and 50% cited maintaining employee morale. Only one-fourth of respondents with active defined-benefit plans say they are not firmly committed to their defined-benefit plan. Seven percent say they plan to close or freeze their plan over the next two to three years.
Fifty-nine percent use automatic enrollment and about half of those have implemented automatic escalation, which typically increases the employee contribution annually. While virtually all employers offer at least a matching contribution to defined-contribution plan participants, more employers are providing non-matching contributions (42% now versus 33% in 2007).
The survey also finds the following:
Hybrid plans are now the most prevalent type of defined-benefit plan for new hires, primarily cash balance plans that combine features of 401(k) plans and traditional pension plans. Fifty-four percent of defined-benefit plans are hybrid plans while 46% are traditional plans.
78% of employers that offer defined-benefit plans to new hires say employees value the guaranteed benefits from pensions more than other features, compared to only 50% of defined-contribution-only sponsors.
54% of employers that offer defined-benefit plans to new hires say employees value income throughout retirement while only 28% of defined-contribution-only sponsors agree.
Other Towers Watson research reveals that a growing number of employees are willing to pay more from each paycheck to ensure a guaranteed retirement benefit. For more information, visit www.towerswatson.com/research/7078.
NEW PRODUCTS
Long-Term Care Cost Projector
HVS Financial added a long-term care cost projector to its RetireMark suite of retirement planning software tools. Reporting features include the following: a forecast of when a person is most likely to need long term care, a projection of future costs based on expected length of nursing home or assisted living stay, residency, and health issues. For more information, visit https://apps.hvsfinancial.com/demo/
Health Exchange Solution
Xerox has formed an alliance with CHOICE Administrators Exchange Solutions to offer a comprehensive, secure, cloud-based health insurance exchange solution in all 50 states. The health-insurance exchange will be fully operational for October 2013 enrollments and for January 2014 coverage effective dates — the deadlines set by the Patient Protection and Affordable Care Act. States can tailor their exchange to meet the needs of their residents and small businesses. “Our discussions with states show that the majority want to…maintain control over their health-insurance exchange rather than defaulting to the federal solution,” said Kevin Counihan, president of CHOICE Administrators Exchange Solutions.
CHOICE Administrators Exchange Solutions delivers the framework of the health-insurance exchange Solution Suite, a software-as-a-service cloud-based platform, which allows participants to make informed enrollment decisions while providing their sponsoring employers the infrastructure to maintain affordable budgets. Xerox provides the business process and technology solutions to help states operating a health-insurance exchange handle massive amounts of information quickly, efficiently and securely on behalf of millions of people.
Mobile Vision Plan Access
EyeMed launched a mobile version of its member website. Members can access www.eyemedvisioncare.com using the Android, Blackberry, or similar mobile devices. Members can view their benefits, including vision exam copays, eyewear allowances, eligibility, the last date of service, as well as the next date they can use their benefits for exams, glasses, or contact lenses. They also get directions to nearby providers.
Benefit Enrollment
MetLife enhanced its M-Powered Enrollment program. The program combines the accessibility of the web, phone, and paper with personalized guidance for employees who are making multiple benefit enrollment decisions. Having a single platform for MetLife benefits and medical plan enrollment reduces an employer’s administrative efforts significantly. For more information, visit www.metlife.com.
Fee Disclosure 408(b)(2) Solutions
Nationwide Financial developed a 408(b)(2) Solutions Kit to help retirement plan advisors address client concerns and adapt to the new Department of Labor (DOL) fee disclosure regulations taking effect on July 1. The kit includes a guide outlining Nationwide’s compliance tools and services, a summary of the requirements, and pointers that advisors can use to clearly explain their services. Nationwide will also give retirement plan advisors regular updates on its 408(b)(2) resources via e-mails and conference calls. For more information visit http://www.nationwide.com/advisor-erisa-questions.jsp.