Does Aetna Exit Signal Deeper ACA Problems?

open_enrollment

San Diego Union-Tribune
The insurance giant Aetna will will stop offering Obamacare health plans in 11 of 15 states, citing $200 million in losses this year and more than $400 million since 2014. The announcement, made Monday night, was the latest blow to the Affordable Care Act, which had already suffered the departure of top-five insurers Humana and UnitedHealthcare and has seen double-digit premium increases for many of the carriers that will continue to sell through health exchanges such as Covered California next year. In general, carriers have said too many sick patients are the main reason they’re dropping out of exchanges or raising rates. With not enough young and healthy enrollees to balance out the claims ledgers, the three companies that are pulling out or down scaling said they have lost hundreds of millions of dollars.

So do these developments mark the beginning of the doomsday scenario for Obamacare? Before the law’s main insurance provision took effect in 2014, many experts predicted that guaranteeing coverage to all consumers regardless of their pre-existing medical conditions would eventually create “sick” insurance risk pools that could not cover their costs without large premium increases each year.

The experts disagree on whether the latest pullbacks and significant pricing hikes, floating in a sea of election-year politics, signal that the nation’s health insurance exchanges have reached a terrible tipping point or are simply seeking a new state of equilibrium.

Gary Claxton, director of the nonprofit research group Health Care Marketplace Project at Kaiser Family Foundation, takes a middle position. He said the currently available facts can be interpreted either way, and that means Obamacare’s upcoming open-enrollment period — its fourth annual — is critical. It will all come down to whether the number of enrollees in Obamacare plans continues to grow, he said. “We won’t know until the next open enrollment, are we still moving forward or are we stalled or moving backward?” Claxton said. ” If the market grows, then I think many insurers will find a way to be part of it… The next couple of months are a moment of truth.”

Just how bad the problem is depends on who you ask. UnitedHealthcare said in April that it expects to lose $650 million this year because the cost of its Obamacare policies has exceeded revenue generated from premiums. Then late Monday brought Aetna’s announcement of its deficits. While its book of business includes insurance plans sold outside of Obamacare exchanges as well, all plans on the individual market (not employer-based policies) have been affected by the Affordable Care Act’s edict to take all comers regardless of their health status.

This picture of unprofitability from some of the nation’s largest insurers contrasts with an announcement last week from the U.S. Centers for Medicare and Medicaid Services that said per-member claims were flat from 2014 to 2015 for exchange enrollees, compared with a 3 percent increase for the broader health insurance market.

The federal government gets its data from the Affordable Care Act’s reinsurance and risk adjustment programs, which have collected broad information on all claims in order to reimburse programs that experienced higher-than-average patient expenses. The reinsurance program will go away next year and many organizations, including Covered California, have said insurers are announcing double-digit premium increases for next year to compensate for this change. Neither the insurance companies nor CMS has released full data sets on Obamacare claims, making it difficult for analysts to reconcile these seemingly contrasting pictures about the financial state of health exchanges.

Brian Blase, a senior research fellow at the Mercatus Center, a conservative think tank located at George Mason University in Virginia, said he believes insurers’ reported losses and their decisions to largely leave the exchanges have been brewing since 2014, the first year exchange policies took full effect. A recent analysis of 174 health plans operating in 2014 showed that premiums would have had to be 24 percent higher than they were in 2014 to cover costs, but that the disparity was erased by the government’s reinsurance program, according to the Mercatus study.

When asked why the recent CMS study indicates a very different scenario, Blase was blunt. “I think they did some gymnastics on how they counted or discounted claims. It is inconsistent with everything else I’ve seen and, frankly, I think that their analysis is inaccurate,” Blase said. He said the current negative pattern will likely deepen, eventually leading to repeal or significant modification of the Affordable Care Act’s insurance regulations. “You’re going to have rising premiums and lower choice. I think the political pressure next year to make changes will be significant,” Blase said. But others such as Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, a foundation that supports independent research on health care practice and policy, don’t see dire signs from the latest insurance developments. She noted that major carriers including Blue Cross, Blue Shield and Kaiser Permanente are not pulling out of exchanges. There is evidence, Collins added, that insurance risk pools tend to be healthier when they’re in larger states such as California. Long-term sustainability, especially where premiums are concerns, appears to be a function of size, which in turn lures multiple carriers who compete with each other for business. Collins said this means the estimated 1,000 U.S. counties with only one insurance carrier are likely to see more significant upward pressure on premiums in coming years, a situation that does, as Blase asserts, seem to suggest the federal government needing to step in. Ideas for intervention range from creating a “public option” similar to Medicare or special high-risk insurance pools to subsidize insurance to cover people with the most expensive medical needs.

Overall, though, Collins said the current information appears to indicate that Obamacare markets are maturing rather than dying. “It’s not surprising that we’re seeing some shake-up in the marketplace this year. There are going to be winners and losers like any competitive market you can think of. Some will compete and gain market share, others won’t,” she said. Additional information on the changes the Affordable Care Act has wrought in California will be forthcoming. The Kaiser Family Foundation is scheduled to release the fourth and final installment of its California health survey on Friday. The survey has tracked the effects of the law across the state since summer 2013. (c)2016 The San Diego Union-Tribune. Visit The San Diego Union-Tribune atwww.sandiegouniontribune.com.

Medicare Supplement Enrollment Reaches Nearly 12 Million

As of December 31, Medicare supplement plans covered over 11.9 million seniors, a 6.5% increase from 2014. The study by Mark Farrah Associates reveals that enrollment in Medicare supplement plans increased by 729,495 covered lives from 2014 to 2015. UnitedHealth is the industry leader, commanding about 39% of the market growth, but several other Medicare supplement carriers also experienced membership gains in 2015.

More than 5 million new Medigap policies were issued in the past three years. Plan F accounted for 55% of the market in 2015, which covers Medicare deductibles and coinsurance and copayment costs. Carriers are selling products at competitive rates while maintaining favorable loss-ratios. The aggregate loss ratio was 77.5% (incurred claims as a percentage of earned premiums). With about 55 million Medicare eligibles, more insurers are diversifying their senior market portfolios

Anthem Increases Discount on Medicare Supplement Plan F

Anthem Blue Cross increased its monthly “New to Medicare” discount in California from $15 a month to $20 a month for the first year members are enrolled in an Anthem Blue Cross Medicare Supplement Plan F. That adds up to a savings of $240 for the year. The discount is available to those who are 65 or older who are within six months of their Part B effective date and have a coverage effective date starting March 1, 2016 or later. Members can also save, each year, if they pay their annual premium up front, have another household member on an Anthem Medicare Supplement plan, or sign up to pay their premiums electronically. Drug, dental, vision, and other benefits are available to accompany the plan for additional costs. Medicare supplement plans provide guaranteed coverage for life as long as the member pays premiums on time and provides accurate information at the time of application.

The IRS Increases Deduction Limits for Long Term Care Insurance

A couple with tax-qualified long-term care insurance coverage could enjoy a maximum $9,500 tax deduction in 2015. The potential tax deduction increases to $9,740 in 2016 according to a just-released IRS revenue procedure. “The potential tax deductibility of tax-qualified long-term care insurance costs is one of the most overlooked benefits, especially for older retired Americans,” states Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI).

The IRS permits deductions for long-term care insurance policies that meet certain eligibility standards. Life insurance policies that offer a long-term care benefit are generally not eligible for a tax deduction. The allowable maximum deduction is based on the policyholder’s age before the end of the taxable year. A couple ages 64 and 66 could be eligible to deduct $3,800 each from their 2015 taxes. The deduction may be possible even if they paid for the policy now before the end of the year.

For 2016, the IRS approved a 2.5% increase. “This is a positive indication of the government’s commitment to encourage more individuals to do some planning. The government recently announced that 60 million people on Social Security will not receive any cost-of-living increase in their 2016 benefits,” he said. Tax-deductible limits for long term care insurance premiums vary by age. The 2015 limit for someone age 55 is $1,430 in 2015 (increasing to $1,460 in 2016).

Slome notes, “You likely will not qualify for a tax deduction while you are still working but you could benefit when you are retired. After retirement, your income is low; the age-based tax deductible maximum limit for long term care insurance is high; and your ability to deduct costs is more likely and much more valuable.”
Slome contends that few individuals are aware of the tax deductibility of long-term care insurance premiums, “We find most people are completely unaware of the opportunity and rules that apply for individuals and self-employed individuals.”

Certain owners of businesses are able to take advantage of special rules that apply to tax qualified long-term care insurance. A small business, established as a C-corporation may be able to deduct the full cost of long term care insurance premiums, even if the cost is above the stated yearly tax limits. Plus, the company can designate who is covered even when the employer pays the full cost.

While deductions may not apply for individuals who are still working, they often can be taken during retirement when income stops and medical expenses often occur. The 2015 and 2016 deductible limits under Section 213(d)(10) for eligible long-term care premiums includable in the term ‘medical care’ are as follows

Many Employers Are Seeing Premium Increases

Despite the Affordable Care Act, 90% of employers face increasing premiums for employee health plans, according to a survey by Arthur J. Gallagher & Co. “By far, the top benefit concern among employers is the rising cost of group medical coverage. Employers are examining all options to rein in medical costs while still offering competitive benefit packages to attract and retain employees in a tightening labor market.

With the Cadillac tax due to take effect in 2018, employers are expected to turn to newer cost-control tactics, said James W. Durkin, Jr., president of Gallagher Benefit Services, Inc. One strategy is to use higher deductibles. This year, in-network family plan deductibles average $3,000 while out-of-network deductibles average $4,500. Annual deductibles for employee-only in-network plans average $1,200, and out-of-network deductibles  average of $2,000.

Among all employer respondents, 42% have at least one wellness program in place. This figure rises to 70% for employers with at least 1,000 employees. But employee participation remains a concern according to 72% of employers that offer wellness programs. The survey uncovered gaps in financial protection benefits.

Covered California Releases Rates For 2016

Covered California Releases Rates for 2016
In 2016, the majority of Covered California consumers will see a decrease in their health insurance premiums or an increase of less than 5% if they keep their current plan. Covered California’s rates for 2016 reveal that the average increase will be 4%, which is lower than last year’s increase of 4.2%.  In addition, consumers who change to a lower-cost plan in the same metal tier consumers can reduce their premiums by an average of 4.5% and more than 10% in some regions.

California Health and Human Services Secretary and Covered California Board Chairwoman Diana Dooley said, “Since Covered California requires health insurance carriers to offer the same products at the same prices inside and outside Covered California’s marketplace, all people seeking to buy health insurance benefit from these rates.” Southern California Consumers can save an average of nearly 10% by moving to a lower-cost plan in the same metal tier while Northern California consumers could limit their rate increase to an average of 1%. The average premium increase is 1.8% for Southern California consumers who stay in their plan and 7% for Northern California consumers who stay in their plan.

COVERED CALIFORNIA RATE CHANGES
2014-2015 Change 2015-2016 Change
Weighted Average Increase 4.2% 4.0%
Lowest-Priced Bronze (unweighted) 4.4% 3.3%
Lowest-Priced Silver (unweighted) 4.8% 1.5%
If a consumer shops and switches to the lowest-cost plan in the same tier -4.5%

Covered California executive director Peter Lee said, “The sheer numbers and health of our enrollees allowed us to sit down with the health insurance companies and negotiate rates downward, which will save our consumers more than $200 million in premiums.” In 2013, Covered California discontinued health plans that did not meet basic standards. Lee said that this decision stabilized the market and helped create a healthier pool of enrollees. Lee said, “Covered California used recent data analysis in its negotiations with plans to prove that our mix of young and ethnically diverse enrollees are among the healthiest in the country; health plans responded by lowering their rates.”

Because of the ACA’s reinsurance and risk adjustment programs, premiums are lower, in general, and health plans cannot benefit by seeking to enroll a healthier population. Lee noted that Covered California is an active purchaser, which means that it can choose which plans participate in the exchange and negotiate the rates, networks, and quality elements to get the best value. Covered California’s standard benefit design creates a level playing field in which health insurance companies must compete on price and quality, Lee added. For details on factors that went into the rates, visit CoveredCA.com/news.

New Law Increases Financial Protections for Seniors Investing in Annuities

New Law Increases Financial Protections for Seniors Investing in Annuities

New consumer protections were ushered in when Governor Brown signed Senate Bill 426 (Leyva) into law. Under the new law, the death benefit for fixed deferred annuities must be at least equal to the annuity amount or the accumulation value for those annuities issued to consumers 65 or older. The law also prohibits companies from charging a surrender penalty on the death benefit payment. Commissioner Dave Jones said, “While many companies do not pay out a death benefit that is less than the premium paid, some insurers do apply surrender penalties reducing the death benefit below the total premiums, which is the reason for this important legislation. I thank Senator Leyva for partnering with me on this change in law.”  Taking effect on January 1, 2016, SB 426 earned strong bipartisan support in the Legislature and was supported by the California Advocates for Nursing Home Reform, California Health Advocates, Congress of California Seniors and the Elder Financial Protection Network. Commissioner Jones encourages seniors to learn more about their options by visiting the Senior Information Center on the California Department of insurance web site atinsurance.ca.gov.

Children’s Health Care Spending Increases under Group Plans

Children's Health Care Spending Increases Under Group Plans
Health care spending for children (birth to 18) increased 5.7% a year from 2010 to 2013 under employee group plans. That compares to a 3.9% yearly increase for the total population (birth to 64) with employer-sponsored insurance, according to a report by the Health Care Cost Institute (HCCI).Per capita spending on children reached $2,574 in 2013, a $391 increase from 2010.

The rise in children’s spending occurred despite a drop in the use of prescription drugs and emergency room visits. Spending on inpatient admissions rose in 2013 as a result of rising prices and slightly higher admission rates for children ─ particularly newborns. The average price of an inpatient admission for a child increased $744 in one year, hitting $14,685 in 2013. Inpatient admissions accounted for about 40% of per capita health care spending for infants and toddlers (birth to three).

Prescription use by children dropped in 2013. This trend, along with a continued shift from branded drugs to generics, meant that spending on children’s prescriptions slowed in 2013. For example, from 2011 to 2013, the use generic prescriptions for asthma and allergies rose more than 300% for babies, more than 700% for younger children (four to eight), more than 800% for pre-teens (nine to 13), and more than 500% for teenagers (14 to 18). At the same time, use of branded versions of these drugs declined to nearly zero.

There were fewer emergency room visits in 2013 for all children. The biggest decline was for teenage boys (a decline of 11 visits per 1,000 teen boys) and pre-teen boys (a decline of 8 visits per 1,000 pre-teen boys). For teenage girls in 2013, labor and delivery admissions declined, falling from five to four admissions (rounded) per 1,000 girls. During the study period, the number of MH/SU admissions continued to rise, increasing by one admission per 1,000 teen girls in every year of the study period, reaching 13 MH/SU admissions in 2013. In 2013, per capita spending for children (birth to 18) was $2,716 for boys and $2,426 for girls. However, spending on health care for girls was higher when children reached their teens: $2,834 compared to $2,661 for boys the same age.

Younger children had the lowest spending among the employer-sponsored insurance population under 19, partially driven by the use of fewer medical services than the other children’s age groups. Spending on these children was $1,703 per child in 2013. This was $3,110 per child less than the spending on babies (birth to 3).

Doctors Say That the Affordable Care Act Increases Healthcare Costs

Sixty-one percent of doctors say that complying with the ACA has increased their overhead costs, according to a report by Jackson Healthcare. Sixty percent say they do more administrative work due to the law, resulting in less time with patients. The law is also costing patients more, doctors say. Fifty-one percent of patients are delaying routine screenings because of the cost of high-deductible plans associated with the ACA. Richard L. Jackson, chairman and CEO of Jackson Healthcare said, “The ACA had good intentions, but failed to solve the major problem with healthcare – reducing costs. If we don’t do something about costs…,we are just rearranging deck chairs on the Titanic.”

Twenty-three percent of doctors say they are retiring, thinking of retiring or becoming part-time in 2015. Ninety percent attribute that decision to the ACA. Sixty-seven percent of doctors accept insurance plans sold in the exchange. Such plans are known to pay less than traditional insurance and in line with Medicaid, according to the survey.

Member Satisfaction Significantly Increases as Health Plans Take Customer-Centric Approach

Following a year filled with negative news coverage about health insurance, a bumpy start to the launch of the Affordable Care Act, and an atmosphere of fear, member satisfaction with health plans has increased significantly as plan administrators take a customer-centric approach, helping to build member trust and loyalty, according to a J.D. Power study.

Member satisfaction averages 679, which is a 10-point improvement from 2014. The increase in satisfaction is driven by improved performance across all factors, most notably in information and communication (+17 points), which is primarily a result of carrier’s efforts to refine messaging, adjust message frequency, and upgrade their websites. Satisfaction in the customer service factor has increased by 11 points, driven partially by matching communication methods to member preferences, such as mobile and text. Cost satisfaction increases by 13 points. Fewer members report a premium increase. They have also seen a decline in out-of-pocket expenses.

Rick Johnson, senior director of the healthcare practice at J.D. Power, said “Health plans have come a long way since last year as the focus has shifted toward better serving member needs and building trust. However, there is still a lot of work to do. Health plans need to take a more customer-centric approach and keep their members engaged through regular communications about programs and services available through their plan. When members perceive their plan as a trusted health partner, there is a positive impact on loyalty and advocacy.”

Satisfaction is significantly higher among the 19% of members who strongly agree their health plan is a trusted partner in managing their health. Among members who say they strongly agree that their health plan is a trusted partner, satisfaction increases by 201 points.

Within information and communication, satisfaction ratings have improved from 2014 in the factor’s four attributes: ease of understanding your plan’s benefits and services, frequency of communications, usefulness of information, and variety of communications.

Similarly, satisfaction ratings have also improved related to premiums, deductibles, co-pays for prescription medication, and co-pays for doctor visits.

Member satisfaction is 108 points higher among members who have contacted their plan via mobile app at least once in the past 12 months than among those who haven’t. While members under 40 years old contact their plan via text and mobile app at a significantly higher rate than older members, the telephone is still the most frequently used contact method across all age cohorts.

Satisfaction is highest among health plan members in the California, Northwest Illinois–Indiana, Michigan, and Mountain regions.

Last Updated 11/18/2020

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