Insurance Insider News February 10, 2010
NEW PRODUCTS l HEALTHCARE l IN CALIFORNIA l LIFE
NEW PRODUCTS
Single-Premium Whole Life
John Hancock Life Insurance launched LifeCare, a single-premium whole life insurance product. It provides protection for life insurance and long-term care (LTC) insurance needs in a single policy. The policy can often be issued in as little as eight days with no exams, labs, or doctors’ statements. For more information, visit www.johnhancock.com.
Free Seminars on Benefits and Workplace Issues
Unum is teaming up with the Disability Management Employer Coalition to offer a series of online educational forums on workplace topics:
• March 9: Clinical and employer-based strategies for managing chronic pain.
• May 11: The 2010 FMLA regulation changes, new case law decisions, administrative issues, and how leave management programs affect the workforce.
• June 15: Voluntary benefits, benefit communication and enrollment strategies.
The sessions will be held on Tuesdays at 9:00 a.m. Pacific time. The one-hour presentations will be followed by a 30-minute question-and-answer session. Participation is free and registration opens six weeks before the event. To register, visit www.dmec.org and select Virtual Education Forums under the Education Events tab.
Mature Market Website
MetLife Mature Market Institute enhanced its website, (www.MatureMarketInstitute.com). It’s now easier to access research, information, and consumer publications. The site also features a new index of resources on Baby Boomers, caregiving, advocacy, health, housing, long-term care, finances, family and work.
Student Fees Waived
The American College is waiving its new student fee of $130 for anyone who registers for their first course by February 26. The new student fee waiver can be applied to any of the following designation programs:
• Chartered Financial Consultant (ChFC)
• Chartered Life Underwriter (CLU)
• CFP Certification Curriculum (CFP)
• Life Underwriter Training Council Fellow (LUTCF)
• Financial Services Specialist (FSS)
• Registered Employee Benefits Consultant (REBC)
• Registered Health Underwriter® (RHU)
• Chartered Advisor for Senior Living (CASL)
• Chartered Advisor in Philanthropy (CAP)
• Chartered Leadership Fellow (CLF)
For more information, e-mail at ProfessionalEducation@TheAmericanCollege.edu, call 888-263-7265 or visit TheAmericanCollege.edu/Gold.
Tools Help with Form 5500 Reporting Rules
Many employers that sponsor retirement plans are struggling to comply with new Dept. of Labor regulations. They are now required to file their annual Form 5500 report electronically and provide more information than ever before. The new regulations can be overwhelming, especially those with 403(b) plans that have to fulfill so many new requirements. The Principal Financial Group has developed online tools that can help streamline the plan sponsor’s data collection and investment expense disclosure. For more information, visit www.principal.com.
Living Benefit Rider for Variable Annuity
The Penn Mutual Life Insurance Company enhanced its Growth and Income Advantage Benefit -- one of the living benefits riders offered on variable annuity products. It offers increased accumulation potential and effective risk management while providing security for retirement savings under dynamic economic conditions. For more information, visit www.PennMutual.com.
Medical Tourism & Global Health Congress 2010
The 3rd Annual World Medical Tourism & Global Health Congress will be held September 22 to 24th in Los Angeles. Register early to save on registration fees. For more information, visit MedicalTourismCongress.com.
HEALTHCARE
People with Medicare Should Act Now to Ensure Uninterrupted Drug Coverage
Every winter, millions of people discover that their Medicare private drug plan no longer covers a medicine they need. Drug plans are required to have a transition policy to ensure that new members have uninterrupted access to drug therapy and that existing plan members have uninterrupted access when their plan imposes new coverage restrictions.
Joe Baker, president of the Medicare Rights Center said, “Transition [prescription] fills offer an important safeguard for consumers, but it is important that consumers act quickly to ensure they have an uninterrupted supply of the medicines they need. Your doctor can help by prescribing generic or lower-cost alternatives that are covered without restriction. If this is not an option, your doctor can help you appeal the plan's denial by certifying that the drugs covered by the plan are not as effective as the prescribed drug or are harmful to you.”
The following consumers will be affected this year:
• Members of drug plans that dropped certain drugs from their list of covered drugs in 2010 or imposed new restrictions on a covered drug in the new year.
• Consumers who switched plans but failed to check that all their medicines are covered under their new plan.
• Low-income people who were randomly reassigned to a new drug plan because their 2009 plan no longer qualified for a full premium subsidy.
Transition policies are effective for the first 90 days of the new plan year and require that plans cover at least one 30-day supply of drugs even if they are not on the formulary. They also require that plans override their restrictions.
The transitional supply should give consumers time to get their doctor to switch their prescription to an alternative drug that is covered by their plan. If that is not clinically appropriate, the transitional supply gives consumers time to appeal the plan's denial, including an appeal to an independent review entity.
Unfortunately, many consumers fall through the cracks. If people don't receive the notice or don't understand the notice from their plan informing them that their prescription will no longer be covered after the transition fill runs out, they may run out of medicine in early February. Drug plans that fail to meet regulatory deadlines can also delay resolution of appeals until after the transitional supply is exhausted.
The Medicare Rights Center offers information on Medicare private drug plans, transition fills, and appeals. Visit Medicare Interactive, a free web-based counseling tool at www.medicareinteractive.org
Health Spending Grows Faster Than the Economy
Nominal health spending in the United States grew 4.4% in 2008. This was the slowest rate of growth since the Centers for Medicare & Medicaid Services started tracking expenditures in 1960. However, healthcare spending continued to outpace nominal economic growth, which grew by 2.6% in 2008 as measured by the Gross Domestic Product (GDP). The findings are included in a report by CMS’ Office of the Actuary.
“This report contains some welcome news and yet another warning sign; healthcare spending, as a percentage of GDP, is rising at an unsustainable rate. It is clear that we need health insurance reform now,” said Jonathan Blum, director of CMS’ Center for Medicare Management.
The 4.4% growth in 2008 was down from 6% in 2007, as spending slowed for nearly all healthcare goods and services, particularly for hospitals. However, health spending as a share of the nation’s GDP continued to climb, reaching 16.2% in 2008, up 0.3 percentage points from 2007. Larger increases in the health-spending share of GDP generally occur during or just after periods of economic recession.
As Americans went without care during the economic downturn growth in personal healthcare, paid by private sources of funds increased only 2.8% in 2008. The recession also made it difficult for many Americans to afford private health insurance, coverage, leading to lower growth in private health insurance benefit spending, which slowed to 3.9% in 2008.
The American Recovery and Reinvestment Act of 2009 (ARRA) also affected healthcare spending by providing a temporary 27-month increase in Federal Medical Assistance percentages (FMAP) used to determine the federal Medicaid payments to states. The legislation led to approximately $7 billion of Medicaid spending shifting from states to the federal government for the last quarter of 2008.
Other statistics include the following:
• Hospital spending in 2008 grew 4.5% to $718.4 billion compared to 5.9% in 2007, the slowest rate of increase since 1998.
• Physician and clinical services’ spending increased 5.0% in 2008, a deceleration from 5.8% in 2007.
• Retail prescription drug spending growth also decelerated to 3.2% in 2008 as per capita use of prescription medications declined slightly, mainly due to impacts of the recession, a low number of new product introductions, and safety and efficacy concerns.
• Spending growth for nursing home and home health services decelerated in 2008. For nursing homes, spending grew 4.6% in 2008 compared to 5.8% in 2007.
• Total healthcare spending by public programs, such as Medicare and Medicaid, grew 6.5% in 2008, the same rate as in 2007.
• Healthcare spending by private sources of funds grew only 2.6% in 2008 compared to 5.6% in 2007.
• Private health insurance premiums grew 3.1% in 2008, a deceleration from 4.4% in 2007.
To read the complete report, visit http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.aspTopOfPage
Healthcare Costs Increase at Double Digit Rates
Costs for the most popular types of healthcare coverage are projected to increase at double-digit rates for 2010, according to a national survey of insurers and administrators by Buck Consultants. There is also uncertainty due to healthcare reform and its impact on all sectors of the healthcare industry. Costs for the most popular medical plans are projected to increase by more than 10% and are in line with the trends reported in the prior two surveys.
Health insurers reported an average prescription drug trend of 10.9%, up 0.1% from the 10.8% reported in the prior survey. For plans that supplement Medicare, health insurers reported a projected increase of 5.8% excluding prescription drug coverage, down from 7.4% in the prior survey. This lower trend reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and co-pays.
The survey also reported trend factors for dental and vision plans. “Health insurers are concerned about higher costs due to federal mental health parity, as well as an increase in COBRA enrollment. There is also uncertainty due to healthcare reform and its impact on all sectors of the healthcare industry,” said Harvey Sobel, FSA, a Buck principal and consulting actuary who directed the survey.
Health insurers use trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future healthcare costs. In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, changes in the mix of services, and mandated benefits. For more information, visit www.bucksurveys.com.
Healthcare Still Tops the List of Most Important Issues
When asked to about the two most important issues for government to address, more people (45%) mentioned healthcare than any other issue. However, many more people, in total, mentioned the economy (32%) or employment or jobs (31%). No other issue comes close. People gave their answers to the Harris Poll without consulting a list of issues. While there is evidence in other polls of health reform fatigue, almost half of all adults still think healthcare is a major priority that the government should address. For more information, visit www.harrispollonline.com.
IN CALIFORNIA
Senators Who Voted Against Outlawing Private Coverage
The California State Senate voted last week to pass a single-payer healthcare bill sponsored by Sen. Mark Leno (D-San Rafael). The bill would prohibit the sale of any private health insurance policy in the state and establish a new California Healthcare System (CHS) as the primary payer for health care services in California. The vote was largely along party lines: 22 Democrats voted for the bill and one
Democrat joined with 13 Republicans to vote against.
MAPLight.org found that Senators who voted against single-payer healthcare, siding with health insurers, got an average of $43,633 each from health insurers and
HMOs in the 2006 and 2008 election cycles -- 97% more than the $22,185
Received by those voting for the bill. The one Democrat who crossed party lines, Lou
Correa (D-Santa Ana), got $56,782, which is 2.5 times as much as the average
Senate Democrat. Correa got more than $8,000 each from Blue Cross of
California, Blue Shield of California and United Healthcare.
The bill now moves to the Assembly. Gov. Schwarzenegger has vetoed similar bills in previous sessions. Details of the analysis, including a list of each state senator, their vote on the single-payer healthcare plan, and campaign contributions to each from healthcare insurers and HMOs can be found at http://maplight.org/ca-senate-single-payer-health-care-vote.
Anthem Blue Cross Joins CaliforniaChoice Small Group Health Insurance Exchange
Anthem Blue Cross and Anthem Blue Cross Life and Health Insurance Company joined the CaliforniaChoice small group health exchange. As of June 1, the partnership will offer HMO and PPO benefits for all new and renewing CaliforniaChoice employer groups. Anthem Blue Cross will join the following health plans available through the CaliforniaChoice small group program: Health Net, Kaiser Permanente, Sharp Health Plan and Western Health Advantage. CaliforniaChoice is the largest health insurance Exchange in America. For more information, visit www.choiceadmin.com
Blue Cross Responds to Flak Over Rate Increases
Everyone from the President of the United States to the California Insurance Commissioner is chastising Blue Cross for it’s recent individual plan rate increase announcement. Anthem Blue Cross submitted proposed rate increases to the California Department of Insurance of as much as 39% for individual health insurance sold in the State. Anthem announced it would implement the increases on March 1 of this year.
Dept. of Health and Human Services (HHS) Secretary Kathleen Sebelius sent a letter to Anthem Blue Cross calling on the company to publicly justify its decision to raise premiums for its California customers by as much as 39%. In her letter, Sebelius notes that the parent company of Anthem Blue Cross, WellPoint Incorporated earned $2.7 billion in the last quarter of 2009.
Commissioner Steve Poizner called on WellPoint executives to postpone the rate increase, allowing the California Department of Insurance proper time for an independent actuarial review of the proposal. Poizner said, “If the independent actuary concludes that Anthem's assumptions are unjustified and that Anthem will pay out less than 70 cents of the premium dollar for benefits, I will take immediate action to stop Anthem from charging the increased rates to California consumers.”
The following is a summary of the Blue Cross’ response to questions about the rate increases:
The individual market premiums are merely the symptoms of a larger underlying problem in California’s individual market – rising healthcare costs. The increasing demand for medical services, the use of new prescription drugs, and demand for advanced technologies are driving up the cost of healthcare at an unprecedented rate.
The pricing structure of our individual products is a reflection of the medical risks and costs associated with this market. As the cost of care increases, premiums rise accordingly. Anthem regularly evaluates its rate structure to make sure that the cost of claims incurred is offset by the premiums collected, and that we anticipate the cost of future, expected claims. At times, based on the cost of covering benefits, rates may be raised or lowered. To assist members who are looking to explore alternative plan options, Anthem offers a team of licensed Health Plan Advisors. Regarding how often an adjustment is made to a member's rates: Anthem complies with all state regulations regarding rate increases and depending on the plan, we are required to provide members with a 30 day notice of any rate adjustment.
Anthem offers a variety of health benefit plans, and we are dedicated to working with our members to find health coverage plans that are the most appropriate, and affordable for their needs.
LIFE INSURANCE
Life Insurers Lay the Groundwork for Recovery
The life insurance industry has survived the financial crisis. It’s bruised certainly, but generally healthier than its financial services peers, according to a report by A.M. Best. While capital measures have stabilized, A.M. Best believes that there are still challenges driven by macroeconomic issues. Additionally, other less obvious trends may have greater, longer-term negative effects on insurers. As a result, A.M. Best Co. is retaining its negative rating outlook on the life/health industry.
Insurers’ investment portfolios have yet to generate the full measure of expected losses. This view reflects concerns regarding sustainability of any positive economic trends as well as the potential for volatile equity markets and the investment risk within commercial real estate. A.M. Best outlined the following business segments and issues:
• Individual Life – In addition to precipitous sales declines, some larger participants have had to limit new business due to capital constraints and reserve funding issues.
• Individual Annuities – A.M. Best views the near-term prospects for individual annuity sales as limited given narrowing corporate bond spreads, generally in the money book of variable annuities industry-wide and less competitive choices for these products.
• Accounting & Regulatory – A.M. Best believes that many of the initiatives to provide near-term capital relief for the industry have removed some of the conservatism inherent in reserve and risk-based capital requirements.
A.M. Best also is concerned about weak life insurance sales and in-force growth as well as the industry’s shift to less creditworthy products. Sustainability of operating performance, stabilization of investment portfolios and some growth in absolute statutory capital levels will be required for A.M. Best to offer a stable ratings outlook.
For more information, visit www.ambest.com.
