Archive | Insurance Company News – California

The high risk of high-risk pools

When the health reform law’s high-risk insurance pools launched last summer, there was a lot worry that the new coverage option would be swamped by demand from uninsured individual. Then, there was worry about too little demand: The insurance pools saw anemic enrollment, with some states enrolling just a few dozen subscribers. And now, there’s a new worry: The high-risk pools attracted such expensive patients, with costly medical needs, that nearly a quarter are running short on cash.

Nine states have asked HHS for additional funds to continue running their Pre-Existing Condition Insurance Plans, the program meant to cover some who insurers have denied coverage between now and 2014, when insurers’ ability to discriminate on preexisting conditions ends. Two states, New Hampshire and California, have requested additional funds twice now, as their high-risk pool’s bills exceed expected costs.

Montana is among the states seeking more funds, and it points at the type of people who enrolled in the plan as the reason for it’s request. The Montana plan has 269 members, a $16 million budget and, via the Billings Gazette, not enough money:

The $16 million, issued in mid-2010 as part of the federal health reform law, was supposed to cover costs of the subsidized health insurance program through 2013 for as many as 400 people covered by the pool.

Yet initial cost estimates turned out to be too low, because the medical costs per covered customer are higher than expected, said Cecil Bykerk, executive director of Montana’s pool.

“Our numbers (for enrollment) were fairly accurate, but per-member, per-month claim costs have been much higher than the original assumptions that we used,” he said.

This isn’t exactly surprising: When the federal government created a new health insurance program catering to those who have had trouble obtaining insurance in the past, it makes sense that those who have very high medical costs would be first in line. It hasn’t helped that the premiums have proved relatively pricey: In Montana, the monthly premium for the high risk pool is as high as $681. Anyone who enrolls in a plan with that kind of premium likely expects to have relatively expensive medical costs in the near future.



Group Health Shrinks as Individual Health Grows

The government is documenting what commercial health carriers and brokers have been saying for months: 2010 was a terrible year for group health plan enrollment.

Brokers, consultants and others said group plan case sizes fell that year as employers slashed head counts.

Analysts at the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) say in the latest National Health Expenditure Accounts report that group health enrollment fell by 2.6%, to 166 million.

The drop meant that 4.5 million lost employer-sponsored coverage than gained it.

The number of people with individual health coverage increased 3.6%, to 22 million, but that market is much smaller than the group market. The increase in individual health program enrollment translated into a net gain of only 800,000 covered lives.

Enrollment in Medicare increased 2.5%, to 47 million, and enrollment in Medicaid increased 5.8%, to 54 million.

Together, those programs and the Children’s Health Insurance Program (CHIP) now cover about 104 million people, or about one-third of the U.S. population.

The number of people who were uninsured increased 1.6%, to 47 million. The rate of increase in the number of uninsured people was down from 8.9% in 2009.


IRS Puts W-2 Health Advice in a Nutshell


January 6, 2012

An Internal Revenue Service (IRS) has tried to boil the new tax Form W-2 health benefits cost reporting requirements down into terms that mortals without advanced accounting credentials can understand.

Wanda Valentine, a senior tax analyst at the IRS, writes about the new W-2 reporting requirements in an employer newsletter.

The Patient Protection and Affordable Care Act of 2010 (PPACA) requires the IRS to establish health benefits cost reporting requirements. Later, the IRS is supposed to set up a program to impose an excise tax on health benefits packages with costs that exceed a designated threshold.

Employers are supposed to report an employee’s health benefits cost in Box 12 on the W-2 using Code DD to identify the amount.

Benefits cost reporting is voluntary for the W-2 forms now going out, but reporting is supposed to become mandatory for issuers of 2012 W-2s.

Even in 2012, “the amount reported does not affect tax liability,” Valentine says.

The IRS tried clarify the new reporting rules earlier this week in IRS Notice 2012-9, a long, complicated batch of guidance.

“The amount reported on the Form W-2 should include both the portion paid by the employer and the portion paid by the employee,” Valentine says.

Valentine notes that, under current law, employers will always have to include some types of expenses and will never have to include others.

The IRS is developing guidance for handling a third batch of benefits expense categories. It will provide transitional relief allowing employers to keep those expenses out of the W-2 health benefits cost totals until guidance is available, Valentine says.

Categories that can always stay out of the health benefits cost total include the cost of:

  • Long-term care coverage.
  • Coverage for “HIPAA excepted benefits,” such as accident insurance and disability insurance.
  • Liability insurance.
  • Worker’s Compensation
  • Archer MSA amounts
  • Health Savings Accounts (HSAs)
  • Salary reductions for flexible spending accounts (FSAs)

Valentine says transitional relief treatment is available for:

  • Employers filing fewer than 250 Forms W-2 for the previous calendar year.
  • Multi-employer plans.
  • Health Reimbursement Arrangements.
  • Dental and vision plans that are not integrated into another group health plan.
  • Self-insured plans of employers not subject to COBRA continuation coverage or similar requirements.
  • Wellness benefits, employee assistance plans and on-site medical clinics, to the extent that the employer does not charge any amount to qualified beneficiaries for applicable COBRA continuation coverage or similar coverage.
  • Forms W-2 furnished to employees who terminate before the end of a calendar year and request a Form W-2 before the end of that year.

Survey shows California healthcare costs rising, benefits shrinking

By Marc Lifsher, Los Angeles Times

January 4, 2012.

Fewer California companies offered their workers health insurance last year, and the ones that did charged employees more for their coverage.

That’s among the findings of an annual California Employer Health Benefits Survey released Wednesday by the California HealthCare Foundation, a research and grant-making nonprofit organization.

According to the survey, premiums for employer health insurance plans have risen 153.5% since 2002, a rate that’s more than five times the increase in California’s inflation rate.

In the last two years alone, the proportion of state employers offering coverage to workers fell to 63% from 73%, the survey said.

“This is a departure from previous years and could be an early sign of future changes,” the foundation report noted in commentary on data collected between July and October 2011 in interviews with 770 private firm benefit managers.

The steady rise in costs during a prolonged economic downturn contributed to decisions by about a quarter of employers to either reduce benefits or increase cost sharing for employees in 2011. A slightly smaller percentage, 22%, opted to make workers pay more of the share of the higher premiums.

Health insurance is expected to take even more money out of workers’ pockets this year. The survey indicated that 36% of California firms said they were either “very” or somewhat” likely to raise the amount that their staff paid in premiums in 2012.

Rising costs and shrinking coverage are accelerating, said Anthony Wright, executive director of Health Access California, a group that advocates for expanded health insurance coverage.

“They are frankly multi-decade trends,” he said. “What is notable is that this is more significant than usual.”

What’s been a “gradual erosion of employer-based coverage in good years” has evolved into “a steep one in bad years,” Wright said. “To be down to 63% [of California companies offering coverage] is huge. It used to be up over 80%.”

Patrick Johnston, president of the California Assn. of Health Plans, blamed the rising premiums on expensive technology, the spread of chronic disease and an aging population, among other factors. Johnston’s organization represents 40 California health plans that cover 21 million people.

What’s more, he noted that years of cutting reimbursements to doctors and hospitals by the government-run Medi-Cal program have created a “cost shift” that has to be “made up in negotiations for higher rates for commercial payers such as employers.”

Insurer profits, Johnston argued, are not a leading cost driver since publicly traded California insurers keep only 13 cents out of every premium dollar to pay for expenses and to secure earnings that average 3% to 5% of revenue.

Both Wright and Johnston predicted that full implementation of President Obama’s healthcare reform plan in 2014 could go a long way toward broadening coverage and to an eventual control of raging medical cost inflation.

“I hope that some of the reforms start to change the picture,” Wright said. “It’s clear that if we repeal [the law] or retreat back to the status quo, we will have some trends that simply are unsustainable.”


Early Retiree Program to Employers: Bye

Officials at the Centers for Medicare and Medicaid Services (CMS) were right back in April when they predicted they would probably use up Early Retiree Reinsurance Program (ERRP) funding early.

CMS stopped taking ERRP applications in May because of concerns about lack of availability of funds, and now officials say in a new notice that ERRP probably will stop helping with claims incurred by the employers already using the program at the end of the year.

The drafters of the Patient Protection and Affordable Care Act  of 2010 (PPACA) created ERRP and provided $5 billion in ERRP funding in an effort to help the dwindling number of employers that still provide health coverage for retirees ages 50 to 64.

ERRP, which began taking applications in June 2010, has been reimbursing participating employers for 80% of the amount of claims costing between $15,000 and $90,000 for early retirees and early retirees’ spouses, surviving spouses and dependents.

The ERRP creators supporters were hoping ERRP would help keep coverage in place for early retirees until 2014. Early retirees cannot get Medicare coverage unless they qualify for Social Security Disability Insurance benefits, and, in states that allow medical underwriting, early retirees with health problems may have trouble qualifying for conventional commercial health coverage.

If PPACA provisions take effect as written and work as backers hope, carriers will still be able to charge older consumers more than they charge younger consumers in 2014, but they will not be able to use an individual’s health status when deciding whether to issue coverage or when setting rates.

Unless Congress provides additional funding, ERRP likely will end 2 years earlier than hoped, because the program already has spent $4.5 billion of its funding, CMS officials say.

Plan sponsors must not mix claims incurred after Dec. 31, 2011, with 2011 claims in ERRP reimbursement requests, officials say.

If circumstances change, and more funding surfaces, CMS may announce that it can help with some 2012 claims, officials say.

“If a claim is incurred on or before December 31, 2011, but paid after December 31, 2011, the sponsor may submit the claim, but not until it has been paid,” officials say.


Physicians Are Pessimistic About Health Reform

Only 27 of doctors expect the Patient Protection and Affordable Care Act (PPACA) to reduce healthcare costs by increasing efficiency and only 33% expect it decrease disparities in healthcare access. In fact, half expect access to decrease because of hospital closures that result from the law, according to a study by the Deloitte Center for Health Solutions. Seventy-three percent of doctors are not excited about the future of medicine. Sixty-nine percent say that many of the best and brightest who might have considered a career in medicine will think otherwise.

Paul Keckley, Ph.D. of Deloitte said, “Physicians are resistant to reform and are frustrated with the direction of the profession. Understanding the view of the physician is fundamental to any attempt to change the health care model; this is the person prescribing the medicine, ordering the test and performing the surgery.” The negativity is driven in part by concern over the pressure primary doctors will face from millions of newly insured consumers seeking care and how it could affect the larger system. Doctors also fear that reform will mean a loss of autonomy and more costs and administrative burdens.

The study also reveals the following about doctors’ opinions:

  • Nearly three-quarters say that emergency rooms could get overwhelmed if primary care physician appointments are full as a result of the Patient Protection and Affordable Care Act.
  • More than 80% say that wait times for primary care appointments are likely to increase because of a lack of providers.  More than half say that other medical professionals (physician assistants, nurse practitioners) will deliver primary care both independently and in addition to physician services.
  • 57% of surgical specialists support repealing the health reform law compared to 38% of primary-care providers and 34% of non-surgical specialists.
  • 59% of physicians 50 to 59 years old say that PPACA is a step in the wrong direction compared to only 36% of those ages 25 to 39 share this sentiment. Younger physicians (ages 25 to 39) are also more likely than older doctors (ages 40 to 59) to think the transition to evidence-based medicine will improve care.

GAO: States Were Quick to Implement PCIP

This article should be read by anyone applying for individual health insurance coverage, with a pre-existing condition sever enough to cause a decline or high rating by an insurance company.In California anyone can obtain health insurance coverage, the only question is the premium. – John Barrett

By Allison Bell – December 13, 2011

The painful birth of the federal Pre-Existing Condition Insurance Plan (PCIP) program — a health insurance program for people with health problems — may be due more to restrictions imposed by Congress than major problems with implementation.

John Dicken, a director at the U.S. Government Accountability Office (GAO), gives that assessment in a PCIP review requested by Senate Democrats. The senators asked the GAO to compare the early progress of the PCIP program to the early progress of the Children’s Health Insurance Plan (CHIP) program.

Dicken notes that Congress tried to keep PCIP risk pool coverage from crowding out existing public and private sources of coverage for people with health problems by requiring that PCIP applicants be uninsured for at least 6 months.

The 1997 law creating CHIP does not include any specific methods for excluding children who already have other health coverage, Dicken writes.

The 6-month no-coverage requirement for PCIP applicants is “the most common factor explaining lower than expected enrollment cited by the state PCIP officials we interviewed,” Dicken says.

Because of the requirements spelled out in the law that created the PCIP program, PCIP coverage costs an average of about $400 per month for a 50-year-old applicant, and the cost of the coverage is another reason for slow early enrollment growth, Dicken says.

“In contrast, many states did not charge any CHIP premiums, and among those states that did, premiums were significantly lower compared to PCIP,” Dicken says.

Congress added the law that created the PCIP program to the Patient Protection and Affordable Care Act of 2010 (PPACA) in an effort to provide immediate relief for people who have a hard time buying health coverage because they have conditions such as obesity, high blood pressure, cancer or hemophilia.

If PPACA takes effect on schedule and works as drafters expect, it will require insurers to start selling subsidized coverage on a guaranteed issue, mostly community-rated basis in 2014.

PPACA calls for PCIP to provide comprehensive health coverage for people with health problems for a price similar to the price healthy individuals pay for ordinary commercial health coverage.

Eligibility is not based on income, and the risk pools cannot charge higher rates for people with more severe health problems.

Congress let states choose between running PCIP risk pools themselves or letting the U.S. Department of Health and Human Services (HHS) provide PCIP risk pool services for their residents.

Program critics originally predicted that millions of uninsured Americans with health problems would rush to enroll in the program and quickly use up federal PCIP funding.

Analysts at the Congressional Budget Office (CBO) predicted the $5 billion in funding allocated for the program could accommodate about 200,000 people.

At the end of August, only about 34,000 people were enrolled in the program.

When the CHIP law was passed, CBO analysts estimated that the program would provide coverage for about 2.3 million children after 1999. After CHIP was in effect for about a year, the program had 705,000 enrollees.

States took about 3 years to implement CHIP and just 7 months to implement PCIP, Dicken says.

States with their own high-risk pool programs started their PCIPs faster than states without existing risk pool programs, but PCIP enrollment in the states with state risk pools was just 3.7 enrollees per 10,000 uninsured lives, compared with 5.5 enrollees per 10,000 uninsured lives in states that started with no state risk pools, Dicken says.



California Officials Measure PCIP Progress

The California Pre-Existing Condition Insurance Plan (PCIP) is growing rapidly, but the number of enrollees is still much lower than expected, and the average amount of claims per enrollee is much higher than expected.

The state’s Managed Risk Medical Insurance Board has reported on PCIP program performance in documents posted in connection with a recent board meeting.

If the Patient Protection and Affordable Care Act of 2010 (PPACA) takes effect on schedule and works as drafters expect, it will require insurers to start selling subsidized coverage on a guaranteed issue, mostly community-rated basis in 2014.

Congress added the PCIP program to PPACA in an effort to provide immediate relief for uninsured people with health problems.

PCIP is supposed to provide comprehensive health coverage for people with health problems for a price similar to the price of ordinary individual commercial health coverage.

Eligibility is not based on income, and the risk pools cannot charge higher rates for people with more severe health problems.

Congress let states choose between running PCIP risk pools themselves or letting HHS provide PCIP risk pool services for their residents.

To avoid crowding out existing commercial health coverage and government-provided coverage, including existing state-funded risk pools, PPACA drafters required that PCIP enrollees have gone without any form of health coverage, including state risk pool coverage, for at least 6 months.

Program critics originally predicted that millions of uninsured Americans with health problems would rush to enroll in the program and quickly use up federal PCIP funding. At the end of August, only about 34,000 people were enrolled in the program.

California was expecting to have about 23,000 residents in its PCIP program by February 2011, and it was expecting those enrollees’ claim costs to average about $1,100 per member per month.

As of the end of October 2011, the program had received about 8,500 applications and enrolled about 6,000 people. The program ended the month with 5,300 enrollees, up from 513 enrollees a year earlier. The enrollees have been averaging claim costs of $3,100 per member per month, officials say.

The high cost means that, unless more funding surfaces, the program can afford to serve only about 6,800 enrollees at a time, not 23,000, officials say.

The state has found that 19% of the enrollees are ages 29 or under; 41% are ages 30 to 49, and 39% are ages 50 to 64. Only 25% of the applicants have had help with filing their applications, and 96% of the subscribers speak English.

About 50 insurance agents and brokers have earned PCIP continuing education credits, and 120 people with the Certified Application Assistant designation have become PCIP certified.

Officials found that program vendors seem to be doing a good job of running the program. The plan administrator is processing 91.5% of clean claims within 10 business days, compared with a goal of 90%, and the administrator has resolved all disputed claims within 30 days, compared with a goal of 95%, officials say.


States worried they’ll bear the brunt of anger over health law’s shortcomings

By Julian Pecquet – 11/06/11 02:39 PM ET  THE HILL.COM

State officials are pushing back hard against what they view as shortcomings in the healthcare reform law for fear they’ll be barraged with complaints when people have trouble affording insurance.

Federal regulators are writing the rules governing key aspects of the law, including the guidelines to determine who’s eligible for subsidies to buy private insurance.

Those benefits will be delivered through state-based exchanges, however, leaving state officials on the receiving end of angry phone calls if glitches in the law aren’t ironed out by 2014.

One key shortcoming is found in the law’s subsidies for people who don’t have access to affordable coverage through their employer. As The Hill first reported in July, the law links the subsidies to the cost of coverage for a single employee. If that coverage is found to be affordable, the individual does not qualify for subsidies in the state health exchanges.

But the determination is based on the single-employee rate regardless of whether the individual has a spouse and/or children, meaning that someone could end up disqualified from the federal assistance, yet unable to afford the family coverage that an employer offers.

“Such an outcome would undermine Maryland’s goal of reducing the number of uninsured residents,” Maryland Health Benefit Exchange officials wrote in comments to the Department of Health and Human Services that were due Monday.

“It could also engender significant frustration with the Exchange among affected families.”

Some states are worried about a particularly powerful constituency: state workers.

North Carolina, for example, fully subsidizes healthcare coverage for its employees, but doesn’t pay a cent of their dependents’ health insurance costs. The average cost of basic family coverage is $516 per month, which is out of reach for many state workers.

“Because employee-only coverage for this plan is provided at no cost to the employee, based on the proposed regulations all family members would be prohibited from accessing subsidies through the Exchange,” North Carolina Commissioner of Insurance Wayne Goodwin wrote to HHS. “This rule puts state employees at a disadvantage as compared to other workers in the state.”

Michigan, which is a party to the 26-state lawsuit seeking to overturn the healthcare law, told HHS that federal officials — not states — should be responsible for hearing appeals from people who are denied subsidies.

And Tennessee points out that states without an individual income tax have no data source to determine who’s eligible for the income-based subsidies in the first place.

The deluge of comments over the past week wasn’t the only sign of increased attention by the states.

The new president of the National Association of Insurance Commissioners (NAIC), Florida Republican Kevin McCarty, vowed Friday to defend state powers threatened by federal intrusion.

“Whether it is Dodd-Frank or the Affordable Care Act, the federal government has become increasingly involved in the insurance arena,” McCarty said. “As your president, I intend to vigorously defend the role of state-based regulation, highlight our accomplishments, and continue to work for regulatory modernization and national uniformity to create an insurance framework that benefits both consumers and the insurance industry.”

NAIC consumer advocate Tim Jost this past week urged the group to take a “leadership role” in pressing states to address potential gaps in the healthcare law’s consumer protections.

Self-insured plans are exempt from most of the law’s regulations, Jost pointed out, and policies offered by large employers also don’t have to meet certain requirements.

Jost also said small businesses are shifting toward self-insurance, so employees will be stuck without benefits Congress intended to provide.



By John Barrett (Based on a story appearing in the San Francisco Chronicle)

In an effort to help improve the health of mothers and infants in California, Gov. Jerry Brown has signed into law a measure that will prevent health insurers from excluding maternity care as a covered benefit.

The new law will require individual insurance policies, beginning July 1, 2012, to cover maternity just as any other condition that requires medical services.

Insurance companies began eliminating maternity coverage from individual policies to mitigate rising health care costs and insurance premiums. The move to less-expensive policies left Californians either unable to find or afford policies that did cover maternity services, or struggling to pay for pre- and post-natal care.

Current law requires health maintenance organizations, HMOs, and health insurers to include maternity coverage in their group plans. But that’s not the case for individual policies, which are typically bought by people who do not have access to group coverage through their work.

In 2010, just 12 percent of individual policies offered maternity coverage, a steep drop from 82 percent seven years ago. With so few options available, the policies that include maternity tend to be pricey because insurers figure the people willing to buy the plan are likely to use it.

The new law is expected to increase premiums for individual policyholders by an average of $6.92 per month, according to the bill’s analysis (I consider this a very low estimate). Insurers will be required to cover the full scope of maternity services, but with the same cost-sharing or co-payments required for other medical services under the policy.

In the past, several insurers opposed the bill, but the federal health care law may make maternity coverage inevitable. Maternity and newborn care are among the benefits expected to be required in plans as of 2014, when most Americans will have to buy insurance.

“There’s really no point in opposing this,” said Richard Wiebe, spokesman for the Association of California Life & Health Insurance Companies, which dropped its opposition to the bill.