Obesity Is Driving Disability Claims

Disability claims have increased significantly over the past 10 years for joint disorders and musculoskeletal issues in the U.S., according to data from Unum. Greg Breter, senior vice president of benefits at Unum noted that aging Baby Boomers are staying in the workforce longer, and more than a third of U.S. adults are classified as overweight or obese. “Almost everyone over 55 begins to feel the twinges in joints and backs. But research is showing that obesity is contributing to a dramatic increase in knee replacement surgery and exacerbates other conditions like arthritis, back injuries and joint pain. We also see obesity contributing to other issues, like heart disease, stroke, type 2 diabetes, sleep apnea and respiratory problems, and certain types of cancer.” Aging and obesity tip scales in Unum’s 10-year review of disability claims. For musculoskeletal issues, there has been a 33% increase in long term disability claims and a 14% increase in short term disability claims. There has been a 22% increase in long term disability claims and 26% increase in short term disability claims for joint disorders. While Unum has seen an increase in joint and musculoskeletal issues, cancer has stayed the number one reason for long term disability claims over the past decade, and pregnancy continues to top the list of reasons for short-term disability.

Here are the top long-term disability causes for 2015:

  • Cancer 16.5%
  • Back disorders 13.9%
  • Injury 10.4%
  • Cardiovascular 9.6%
  • Joint disorders 9.2%

Here are the top short-term disability causes:

  • Pregnancy 27.4%
  • Injury (excluding the back) 11.3%
  • Joint disorders 2%
  • Back disorders 7%
  • Digestive system 6.6%

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%.

The Benefit Gap for Small Businesses

Health insurance is offered to 96% of employees at large and small companies and 89% of employees at small-businesses, in particular. But the study by Lincoln Financial reveals a much larger gap when it comes to other benefits:

Benefits offered Small Business Employees Employees of businesses of all sizes
Dental Insurance 74% 91%
A retirement plan 72% 89%
Vision insurance 66% 84%
Life insurance 62% 81%
Disability insurance 52% 74%

Employees at small businesses say that it’s important for their employers to offer these benefits:

  • 90% a retirement plan.
  • 87% dental coverage.
  • 83% vision insurance.
  • 76% life insurance.

Almost 70% of employees at small businesses say that benefits have influenced their employment decisions. Business-continuation strategies are critical since more than 50% of small-business owners are 50 to 85. Life insurance can help ensure that the business continues in the event of the death of an owner, co-owner, or key employee.

Employees Want Financial Guidance and Benefits

Forty-six percent of employees expect their financial situation to get better in the next year, and they’re turning to the workplace for financial education, according to a recent MetLife study. These financial concerns may be making employees more loyal, with 45% of employees planning to work for their current employer 12 months from now, compared to 41% last year. The study finds the following:

  • 47% of employees say that non-medical benefits can help limit their out-of-pocket medical expenses.
  • 52% of Millennials understand life insurance compared to 69% of Baby Boomers.
  • 38% of Millennials understand long term disability insurance compared to 57% of Baby Boomers.
  • 68% of Millennials prefer one-on-one consultations with a benefit expert, compared to 62% of Gen Xrs and 57% of Baby Boomers.
  • 44% of Millennials want their employer to help them solve their financial concerns compared to 20% of Baby Boomers
  • 75% of Millennials say employers have a responsibility for the financial well-being of employees.
  • 62% of employees are looking to their employer for more help in achieving financial security through employee benefits, compared to 49% in 2011.
  • 44% of employees feel in control of their finances.
  • 65% of Millennial employees don’t have a savings cushion of three months of salary.

The study finds that strong communication is a key driver of employee confidence when selecting benefits. The most effective resources are one-on-one consultation. Todd Katz, executive vice president, Group, Voluntary & Worksite Benefits, at MetLife said, “Employers looking to harness the power of one-on-one consultations can turn to outside experts such as brokers, consultants, and enrollment communications firms. For employers, this is an opportunity to evolve into a more consultative role and provide meaningful education and training for employees, while engendering loyalty. Helping employees understand the value of their benefits through engaging communications is critical for employee and for the workplace. If employees fully understand their benefit options, they’ll make better purchasing decisions and decrease their financial stress. To alleviate confusion about benefits, it’s critical that employers…enable their employees to make informed decisions about which benefits best suit their needs. This includes providing a variety of decision-support resources and offerings to help them make educated benefit decisions.”

It’s time for employees to review available benefits

As 2015 ends and 2016 begins, employees should review handbooks and ensure they are not missing out on valuable benefits, writes consumer advocate Dee Lee. Retirement benefits, savings plans, health and dental benefits, life and disability insurance, health and weight-loss programs, and flexible spending plans are among the benefits “worth real dollars” to employees, she writes. WBZ-TV (Boston) (12/28)

Busting Employee Benefit Myths

Busting Employee Benefit Myths

  • Adding non-medical benefits would break the company’s budget:Affordable group dental, disability, vision, and life insurance options are available for companies with two to 99 employees. Adding benefits doesn’t have to mean adding to the benefit budget. Fifty-six percent of employees are willing to bear the cost of ancillary benefits, according to a recent MetLife study. Sixty-five percent of employees agree that having customized benefits would increase their loyalty. Employees who are satisfied with their benefits are nearly four times as likely to be satisfied with their job. A study from the Center for American Progress estimates that replacing an employee costs an average of 20% of their annual salary. So if a worker making $50,000 a year quits, you’ll pay roughly $10,000 to cover the lost productivity and then recruit and train someone new. It’s a better strategy for employers to focus on retaining key employees and driving increased satisfaction through benefits. This is especially important for small businesses where the cost of replacing an employee may be higher because it may be less likely that other employees have been cross-trained to fill in the gap. Brokers should discuss how the cost of benefits can be shared and that employees are willing to take some of the responsibility. Also, address the financial implications early on to show small business decision makers how non-medical benefits can add to their businesses.
  • Administering Group Benefits Is Too Time-Consuming: Consolidating multiple coverages with a single carrier can reduce administration. Exploring new channels, such as private exchanges, can help identify opportunities for increasing benefit choices while reducing administrative burdens. Making carrier recommendations based on services, ease of implementation, educational resources, and customer understanding as well as price will give small business decision makers the support they need.
  • Dental Insurance Isn’t Important: Dental insurance is a benefit that is in high demand—and highly utilized—by employees. Sixty-three percent of Gen Y and Baby Boomers are interested in purchasing dental insurance at work. More than half of Gen X are interested in purchasing this coverage. According to the National Association of Dental Plans (NADP), people without dental insurance are less likely to get dental care, which means missed opportunities for prevention and early treatment. In fact, the NADP finds that those without dental benefits report higher incidences of other illnesses: sixty-seven percent are more likely to have heart disease; 50% are more likely to have osteoporosis; and 29% are more likely to have diabetes. The Centers for Disease Control and Prevention finds that more than 164 million work hours are lost each year due to dental problems. By offering dental benefits, employers can capitalize on the link between oral health and overall health and lay the foundation for a healthier, more productive workforce. Small business brokers should discuss this link with their clients.
  • Benefits Won’t Help Attract Employees: According to a 2014 study from the Employee Benefit Research Institute, 76% of employees say benefits are a very or extremely important in their consideration of a job offer. Brokers should explain how small business owners can leverage the benefits they provide.
  • Benefits Won’t Help Retain Employees: According to Glassdoor.com, 48% of employees are confident that they can find a job that matches their compensation level within six months of starting a job search. With that in mind, small business owners need to evaluate what they are offering to employees beyond salary. What added perks will make employees feel valued enough to keep them from looking around in the first place?  CareerBuilder reports that 58% of respondents identified better benefits as the best way to improve employee retention. Offering better benefits means offering a range of benefits to meet a variety of employee needs; this includes medical plus ancillary options that employees can choose from and pay for on their own. Employees who are satisfied with their benefits are nearly four times more likely to be satisfied with their jobs, according to MetLife’s study, once again reinforcing the impact benefits can have on existing talent. Not offering a range of employee benefits opens the door to competitors looking to attract high-performing employees.

Employees Unhappy with Benefits and Employers

NotHappyWhen asked how they like their benefits, employees gave the lowest rating in six years, according to a survey from Unum. Only 47% say their benefits are excellent or very good. Only 33% say that the benefit education their employer provides is excellent or very good, and 28% say their benefit education is fair or poor. This is a reversal to the upward trend in ratings since 2009. Only 49% say their workplace is excellent or very good. Seventy-seven percent of workers who say their benefit package is excellent or very good also say the same of their employer. In contrast, only 17% of employees who say their benefit package is fair or poor also say that their workplace is excellent or very good. And 79% who say their employer’s benefit education is excellent or very good say the same of  their employer — compared to only 30% of those who say their benefit education is fair or poor. Bill Dalicandro, vice president of the consumer solutions group at Unum said, “This research underscores the value of an effective benefit education plan because when an employee understands their benefits, they tend to value them more and…may value their employers more for providing access to them.” For more information, visitwww.unum.com.

2013 Long Term Disability Claim Payments Soar

Disability claims payments totaled $9.8 billion in 2013, a 1.6% increase over 2012, according to the Council for Disability Awareness (CDA).  In addition, more employers (214,000) offered long term disability benefit plans in 2013 than in 2012, yet the number of insured people fell 1% to 32.1 million — a decrease that may reflect the trend toward more voluntary/employee-paid disability benefit plans in which not all eligible employees enroll. CDA President Barry Lundquist said, “Despite increased consumer confidence, many employers and wage earners seem to have adopted a wait-and-see attitude toward benefit expenditures, a possible result of economic uncertainty and the fear of continually rising healthcare costs. It is a concern that, while more employers offered long-term disability benefit plans in 2013, fewer workers are actually protected. More and more employees are becoming responsible for making their own benefit decisions, so it’s critical to educate them about their risk of an income-interrupting illness or injury and the consequences of losing their paycheck. If our education efforts in this area are ineffective, we can expect declining numbers of employees with protected incomes in the years to come.”
The following are other key findings for 2013:

• Women accounted for 56% of new disability claimants approved by CDA member companies.
• The average claimant age exceeded 50 for the first time. Claims for those age 50 and older have been increasing consistently, mostly driven by claimants over age 60. Yet, more than four in 10 new claimants were in their 40s or younger.
• Musculoskeletal system/connective tissue disorders remain the leading cause of new disability claims, followed by cancer, injuries, cardiovascular/circulatory disorders and mental disorders.
• The total number of existing claimants who received disability payments fell 3% to 653,000.

For the second year in a row, new disability claims declined after increases in 2010 and 2011. The 5.7% decrease in new approved claims in 2013 is a result of fewer claim applications received, which is one indication of an improving economy. The number of disabled workers receiving Social Security Disability Insurance (SSDI) payments last year increased 1.3% to more than 8.9 million, which is the slowest growth rate in over a decade. To get a copy of the 2014 CDA Long Term Disability Claims Review, visit www.disabilitycanhappen.org.

Many Employees Don’t Know How to Handle A Disability

Twenty-three percent of employers are not sure of how to handle disability absences and or accommodate disabled employees, according to a report by the Standard. Only 37% of employers have worked with their disability insurance carrier to find employee accommodations. Based on a series of case studies, the report found that employers make these common mistakes when it comes to employee disability issues:
•  Strictly enforcing policies
•  Believing that employee accommodations are too expensive
•  Not considering new approaches
•  Devaluing an aging workforce
•  Not asking for help

The authors note that mishandling or refusing reasonable accommodations can result in a complaint with the Equal Employment Opportunity Commission or even a lawsuit for failing to accommodate a disabled employee. For more information, visit www.workplacepossibilities.com.

Health Insurers Navigate a Sea of Change

A report by A.M. Best describes how health insurers are responding to health reform. Many have diversified over the past few years, offering products to multiple segments, including individual, employer groups, and government-sponsored (Medicare and Medicaid managed care). They are also providing more diversified membership, revenue, and earnings.

In 2012, several large acquisitions led to diversification by segment and/or geography. Several of the larger carriers expanded with more service oriented and unregulated supplemental business. These complementary products provide varied sources of earnings and cash flow, which can enhance operating results.

Health insurers’ margins compressed during 2012 along with a modest rise in utilization. However, utilization remains relatively lower than in the past, but there was some regional variation. Medical cost trends have increased slightly.The minimum medical loss ratio (MLR) requirements and rate reviews have pressured earnings, as did a shift to government-funded programs with its lower margins. Carriers also have faced increased expenses due to the implementation of ACA. With open enrollment for exchanges set to start later this year, health insurers can expect costs to escalate throughout the remainder of 2013.

A.M. Best says the majority of health carriers will be able to adapt and maintain profitability, although it could be with lower margins, increased regulation, and uncertainty over state exchanges in the near-to-medium term. The ACA could lead to more competitive pricing, making it harder for smaller, more specialized carriers to compete. In January, A.M. Best had a stable outlook on the health insurance industry as a whole, but a negative view of smaller, more specialized companies in the individual and small-group health segments. A.M. Best has concerns about profitability, given the minimum MLR requirements.

Health insurers have been busy implementing ACA provisions, such as the MLR requirements and rebates. They are also preparing for health insurance exchanges, developing accountable-care organizations, and adopting the consumer-focused shift in marketing.

Over the past few years, health insurers have faced increased regulatory scrutiny, particularly on rate increases. According to HHS data released in September 2012, 36% of all rate increases were approved; 26% were modified and implemented; 12% were withdrawn prior to a determination; and 26% were deemed unreasonable or rejected.

The health insurance sector will continue to change as the market moves toward exchanges and transforms from an employer-focused market (business-to-business) to an individual focused market (business-to-consumer).

Multi-state carriers are assessing in which states they will offer products via an exchange. Some state-based exchanges have started reviewing applications from carriers. With open enrollment set to start in the fourth quarter of 2013, decisions need to be made in the next few months.

The health insurance industry must be ready for the multitude of changes. Many people will start purchasing health insurance through the exchanges in 2014 including some who have employer-based coverage today. Also, people could move between Medicaid and exchange products with subsidies, based on their income level. Carriers are reformulating their plans to incorporate businesses and products, looking at creating joint venture partnerships with providers and others, and preparing for new competitors.

Over the past few years, many carriers have diversified by offering products to multiple segments, including individuals, employer groups, and government-sponsored programs. Several of the largest carriers have expanded into supplemental lines of business. By offering these complementary products, health insurers gain a wide-range of regulated and non-regulated cash flow.

Cooperation among providers and health plans has also increased over the past few years. A notable example is the formation of accountable-care organizations (ACOs), which have grown exponentially. These entities include various providers, such a hospital and physician groups, and health plan based structures, with varying payment models. The goal is to improve the quality and coordination of care at the lowest cost.

As the cost of care escalates, and the government looks for ways to control the deficit, Medicare beneficiaries may be a test population for ACOs. While provider groups develop ACOs, health plans are evaluating their roles and testing ways to participate. Some larger health insurers are acquiring or partnering with provider groups or forming ACOs on their own. In some more cases, plans such as Highmark, have affiliated with a hospital system. However, A.M. Best does not expect many other health insurers to follow suit.

The ACA allows for federal funding of Consumer Operated and Oriented Plans (COOPs) that offer affordable healthcare solutions to small businesses and individuals. ACA provided several billion dollars of low interest loans to these entities. However, the funding was stopped as part of the fiscal cliff agreement passed in January 2013.

Government Programs

Over the past few years, health insurers have expanded or entered the market for Medicare Advantage and Medicaid managed care. The number of Medicare-eligible people is expected to rise steadily over the next decade. Furthermore, these retirees are more familiar with managed care products and may be more likely to choose a Medicare Advantage product. Medicaid managed care membership has grown steadily over the past few years due to the economy faltering; states switching or expanding Medicaid managed care programs to control costs; and states establishing managed care programs for the dual eligible population. Many states will expand the Medicaid eligibility up to 133% of the federal poverty level in 2014. As a result, more health insurers are interested in growing their presence in this market.

Medicare Advantage

Enrollment for Medicare Advantage plans has been exceptional at 10% from 2011 to 2012, according to the Centers for Medicare & Medicaid Services (CMS). Some of the top plans have consolidated. Market leaders include UnitedHealthcare with 19% of the market and Humana with 17%. PPO growth in this sector was 13.8% in 2012, and HMO-enrollment growth was 10.1%. However, enrollment in private fee-for- service plans (PFFS) declined 11.8% in 2012. Carriers are moving away from PFFS plans, mainly because of the Medicare Improvements for Patients and Providers Act, which requires them to provide provide a full or partial provider network in PFFS plan service areas.

Mergers & Acquisitions

Mergers and acquisitions accelerated significantly in 2012. The trend toward larger-scale acquisitions began in the fourth quarter of 2011 with announcements that Cigna Corp. was acquiring HealthSpring and UnitedHealth Group was acquiring XL Health. The majority of acquisitions involved government-sponsored business. Several larger transactions focused on increasing Medicaid managed care capabilities, such as WellPoint’s acquisition of Amerigroup. Also in 2012, Cigna’s acquired HealthSpring and Humana acquired Arcadian Management Services, which are multi-state Medicare Advantage companies.

The Medicaid expansion, which takes effect Jan. 1, 2014, is expected to generate substantial growth in the number of eligible people. In addition, due to budgetary pressure, more state governments are transitioning to Medicaid managed care. States are especially interested in cost-effective managed care solutions for the dual Medicaid and Medicare eligible population.

The trend toward acquisitions of Medicare Advantage companies and/or blocks of business continued in 2012. Large publicly traded companies are expanding their presence while smaller, local players are exiting because of a higher regulatory burden and potentially reduced margins. Managed-care companies have been building more comprehensive portfolios and expanding non-regulated revenue by acquiring healthcare related services, analytics, and technology companies. Aetna ’s acquisition of Coventry Health Care allows the company to expand into new regions and products. It also allows for revenue diversification of regulated and non-regulated business. UnitedHealth Group acquired Amil Participacoes S.A., Brazil’s largest health insurance company. The transaction is expected to offer growing revenue that is independent of U.S. economic conditions and regulatory changes.

A.M. Best expects mergers and acquisitions to continue, with emphasis on government-sponsored programs, such as Medicare and Medicaid, non-regulated services, and possibly integrated care delivery capabilities. Some smaller commercial carriers may exit the market, which creates opportunities for individual and group membership acquisitions. However, large-scale transactions are likely to decline in the near term.

Financial Earnings

Health insurers’ earnings remained quite favorable in 2012, although margins declined due to the following factors:
• The MLR requirement.
• Rate-review.
• Medical trends.
• A shift in business mix to Medicare Advantage or Medicaid managed care.

Most carriers are pricing products to fulfill the minimum MLR requirement. Combined with the rate-review process on individual and small-group products, this has led to a lower rate increases. While rate increases have slowed, carriers don’t appear to be pricing irrationally to win business.

Many health insurers have increased their presence in government-funded programs due to a lack of growth in commercial membership. Employer groups have shifted from fully insured to self-funded; there have been big enrollment increases in Medicaid managed care plans; and more people are aging into Medicare, which affects enrollment in Medicare Advantage.

While government-funded business is profitable and has larger premiums on a per-member basis, it remains a lower-margin business. Medicare Advantage reimbursement rates from CMS will decline in some geographic locations as rates move closer to fee-for-service parity. Medicare Advantage plans can offset some of this effect with the star bonus program. Under this program, CMS makes additional payments to insurers that achieve certain quality measures.

While Medicare Advantage and Medicaid managed care are lower margin businesses, these lines are not subject to the MLR requirement. Also, premium revenues grew 9.8% for publicly traded companies compared to 1.4% for the Blue Cross/Blue Shield group. Seven percent of publicly traded companies experienced double-digit premium increases; six saw increases of 20% or more. Cigna acquired a large Medicare Advantage plan in 2012, which drove the up premiums. Margins are expected to narrow in 2013. Health insurers are pricing products closer to the minimum MLR. Meanwhile, utilization is expected to continue increasing, but not significantly.

Many carriers’ need innovation and diversification to gain market share in the employee-benefit marketplace. Technological advancements like smart phone applications and web capabilities are becoming a differentiating factor that could generate sales.

Shift to Voluntary Benefits

Employee benefit carriers that have not sold voluntary coverage are cautiously entering the market. For example, the Principal recently added voluntary critical illness to its suite of products. This reflects the type of adjustments that are occurring throughout the industry. Employees want customizable benefits, flexibility in the amount of coverage, duration of coverage, and distribution of premium payments. The most popular coverage types are accident and critical illness. But hospital indemnity, limited medical benefit plans, and other similar supplemental medical plans are becoming increasingly successful due to gaps in major medical coverage and the fact that more consumers have high-deductible plans. Carriers have high expectations for near-term growth and success in the voluntary/worksite market. Offering a bundled package that includes integrated disability, absence management and wellness program is another form of market differentiation.

Disability Insurance

Many larger disability carriers have some wellness or absence management options available; smaller carriers may look to implement these as well, but would likely do so through outsourcing or partnering with other companies.The widespread increase in disability claims in early 2012 has moderated, with a few carriers still experiencing some volatility in certain pockets of business. To offset this, carriers are offering premiums by industry segment and geographic location. An aging workforce is not helping disability claims incidence. Disability insurers continue to lower discount rates to reflect the interest rate environment and have strengthened reserves. Many carriers have seen a significant shift in sales from true group coverage to voluntary and have offered more options and value.

Long-Term Care Insurance

The long-term care market is highly concentrated. The top 10 insurers account for about 90% of business. The largest writers of individual long-term care policies include Genworth, John Hancock, Mass Mutual, Mutual of Omaha, New York Life, and Northwestern Mutual. In a five-year period, 10 of the top 20 carriers have stopped selling long-term care policies. Prudential stopped offering individual long-term care policies last year, but will continue sales through employers and affinity groups.

Unum has discontinued long-term care sales while Guardian and MetLife placed their businesses in run-off. Many other companies, especially smaller to medium-sized carriers, struggle with managing older blocks of business or building sales. Several have limited participation in the long-term care market, have implemented substantial rate increases, or have exited this line.

Small to medium-sized carriers that have discontinued individual long-term care products over the past 24 months include CUNA Mutual, American Fidelity, Assurity Life, and the Wisconsin Education Association.

Given the aging U.S. population, there is a demand for affordable long-term care products. The Pension Protection Act of 2006 opened the door for hybrid products featuring long-term care riders. Numerous life/long-term care combinations have entered the market in the past few years, and development continues at a steady pace. Products with less generous benefits, shorter benefit periods, and life and annuity components are being offered.

Recently, John Hancock is offering a unique crediting provision that makes protection more affordable. The product features an alternative to the traditional inflation option as well as automatic increases in benefit and voluntary buy-up options. Benefits grow through an automatic crediting formula tied to a segment of John Hancock’s investment earnings, and there is no corresponding increase in premiums.

LIMRA has reported an increase in sales of individual long-term care policies through the first three quarters of 2012. A.M. Best sees the potential for sales to grow further since only 7% of eligible Americans have individual long-term care policies. Insurers are challenged by low interest rates, persistency, morbidity and the increasing cost of care.

In several cases state regulators have been slow or unwilling to approve rate increases. Also, with the extended low interest rate environment, long-term care writers are seeing low investment returns and more reinvestment risk. Also, policyholders are retaining coverage into later years when more claims are likely. Also, the costs of nursing home facilities and home health care continue to rise. These risks and challenges have caused many long-term care insurers to apply for significant rate increases, and A.M. Best expects this trend to continue.

Medicare Supplements

As Medicare supplement membership continues to grow, the environment remains very competitive. There has been more competition from larger, more aggressive national carriers in recent years, which has made it more challenging for small to medium-sized companies.

In recent years, carriers that have been more aggressive in pricing have sought larger than normal rate increases from regulators. A.M. Best says that more state regulators may be hesitant to allow large increases that affect senior citizens on fixed or limited incomes. This will pressure some carriers’ financial results. Over the past few years, several companies have entered or re-entered the Medicare supplement market. In 2011, Aetna acquired business from Genworth. In August 2012, Cigna acquired business from American Financial Group. In February, Cigna will start selling Medicare supplement plans underwritten by American Retirement Life. These transactions allow Aetna and Cigna to offer a range of products to the senior market, including Medicare supplement and Medicare Advantage.

Dental Benefits

Dental carriers have focused on the group/employer market. The majority of business has been in the employer segment. However, this is shifting with growth in voluntary dental products. Dental insurers have been expanding into the individual market.

Marketing to individuals will be important in 2014. It has yet to be determined whether dental carriers will be able to offer individual dental products through the exchanges. However, the definition of “essential health benefits” includes pediatric dental coverage. Dental insurers have been working with the states for the ability to offer pediatric coverage on the exchanges or to partner with health insurers on the exchange to provide these benefits. Dental insurers are working with the states and the federal government on exchange products. Financially, the dental insurance industry demonstrates strong operating capacity, with very favorable net premium leverage ratios of less than three times capital. The dental industry is capable of supporting a large influx of members. However, the availability of providers may fall significantly short in certain geographical areas.

Ratings Outlook

A.M. Best maintains a negative rating outlook for smaller, more specialized companies in the individual and small-group health segments. A.M. Best has concerns about profitability, given the minimum medical loss-ratio requirements and higher administrative expenses. This segment could be more exposed to competitive pricing, which would make it harder for the less diversified carriers to compete. As a result, small, specialized carriers could be affected more greatly by the loss of members in 2014, and may not have the scale to participate in the exchanges. These smaller, specialty companies could see more negative rating actions. However, A.M. Best says that the majority of health insurance carriers are well positioned for the challenges that lie ahead. For more information, visit www.ambest.com.

Last Updated 05/05/2021

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