Wednesday, August 31, 2016

Insurance working properly, Wellmark-style

They say that "the exception proves the rule," and I think that FoIB Allison Bell has found the exemplar:

"Wellmark Blue Cross Blue Shield of Iowa says it spent $18 million on medical bills for just one patient in 2015."

And that's just from July forward. The patient suffers from a ""severe genetic disorder," and is racking up about $1 million a month in claims. In fact, this one insured accounts for some 10% of the almost 43% rate hike Wellmark's seeking for 2017. As this is a fully compliant ObamaPlan, there's no end in sight, since there's no cap (aka "lifetime maximum").

So why do I call this "insurance working properly?"

Well, because insurance should be about spreading the risk (and the pain). And this certainly qualifies: no average person could afford this kind of health care spending on his own. And since it's a genetic disorder, I don't feel any moral qualms as I would for someone with a lifestyle-related condition. This is simply the hand that this person was dealt.

And yes, it's a lot of money, and money means resources, being spent on one person. My faith requires me to "choose life," and that's the over-arching sentiment here. It's not for birth control convenience items or routine expenses, it's for a catastrophic claim, what health insurance should be about.

May this poor soul find a path to healing.

Mid-Week Linkage Roundup

From the "Everything Old is New Again" Department: My late mother had Post-Polio Syndrome, a result of childhood exposure, but (thankfully) she never had the full-blown version of the dread disease. A common treatment for those that did was the so-called "iron-lung." Fortunately, we've long since eradicated polio, but FoIB Allison Bell warns that we may have to dig those old machines out of mothballs:

"Zika May Be Polio All Over Again ... the CDC concluded, “after careful review of existing evidence,” that “Zika virus is a cause of microcephaly and other severe fetal brain defects” in newborn infants."

Heads' up.

Co-Blogger Mike thinks that Belgium might be catching up to Sweden in the Bizzaro World medical tourism race:

"Euthanasia tourists are flocking to Brussels to get a lethal dose. Doctors at hospitals and clinics at Belgium’s capital are seeing an increase in number of euthanasia tourists who are travelling from across the world"

Supply and demand.

FoIB Jeff M first alerted us to troubles brewing for North Carolina's Blue Cross franchise back in May. Today he shares this update in the continuing saga:

"The N.C. Department of Insurance announced Monday it will broaden its investigation into Blue Cross and Blue Shield of North Carolina, citing “disagreements” with the insurer."

At issue are continuing IT and claims processing issues.

Gotta love the tech.

And finally, via FoIB Holly R, this sad (and highly unusual) case from Great Britain (and for once, it's not about the MVNHS©):

"[A] 61-year-old British bagpipe player who developed a dry cough and breathlessness that worsened over a period of seven years ... He died several weeks after entering the hospital"

Turns out, several different - and deadly - fungi had taken up residence in his bagpipe, which he had neglected to clean. Truly sad, but perhaps a helpful warning to fellow pipers.

Death by Amazing Grace?

Tuesday, August 30, 2016

Tick-Tock: Welcome to the Walmart Marketplace

As we noted earlier this month, agents have the opportunity to sell ObamaPlans at Walmart stores around the country. But the window for signing up to do so is closing.

From email:

"Tomorrow (August 31) is the last opportunity for agents and brokers to sign up to enroll consumers in Marketplace plans in Walmart stores.

In order to participate in this Walmart event, you must hold a valid state license and be trained and registered to participate in the Marketplace for 2017."

Interested? Then click here to get started. And any readers that do choose to participate are encouraged to let us know what you think of the experience.

MVNHS© circling the drain?

Earlier this month, we noted the financial difficulties facing the Much Vaunted National Health Service©, and observed that if you're a government-run health care system and you're going broke, that's a problem. But it's not the only problem - lack of self-awareness is also strong:

"Yet oddly, rationing is not entirely dead. It is alive and well and making a comeback in our “precious” National Health Service." [emphasis added]

Just now noticing that, Jeremy? Had you been a regular IB reader, you'd have seen examples for years. Better late than never, one supposes. And he does, in fact, make an extraordinarily brilliant point:

"In a tax-funded health care system, the normal, self-limiting rules of supply and demand don’t apply."

Which is exactly right, and we're already seeing signs of it here, with only a partially government run health care scheme:

"A majority of new enrollees are considered high risk, meaning insurers will have to spend more money on people in poor health and requiring expensive  care."

Mr Warner goes on to point out three "new elements" that have entered the picture: mass communication, an aging society, and ever-growing, ever-changing tech. Notice the elephant in the room that he doesn't mention?

[Hat Tip: FoIB Peter K]

Monday, August 29, 2016

History Can Be Fun

Shortly after ACA was enacted into law in 2010, Senate Finance Chairman Max Baucus, whose Committee wrote most of it, "tried to calm an angry Montana voter by saying this: “Mark my words, several years from now, you’re going to look back and say, “Well that wasn't so bad after all”. 

Senator, we did mark your words.
It’s now been several years. 

It's pretty clear the average person today would NOT say: “Well, that wasn’t so bad after all”.  

In fact, a great many Americans are still looking for a good reason to calm down about Obamacare.

I think perspectives like these help explain why history can be fun.

Now in fairness to Senator Baucus, he had begun to change his opinion of Obamacare, in fact had become a critic, within a couple years of its passage.  Not necessarily because he disagreed with Obamacare's goals; more likely because the Administration's fumbling, bumbling, and rumbling threatened to prevent the law from accomplishing its goals.

The Washington Post reported Senator Baucus' changing opinion during 2013.   Early that year,  the Senator told HHS Secretary Kathleen Sebelius, “I just see huge train wreck coming down. You and I have discussed this many times and I don't see any results yet.” Later that year, the Post reported Senator Baucus commented (about the health-care exchanges and the government enrollment Web site) "Let's just see how much of this can be put together, how much Humpty Dumpty can be fixed, in the next month."

Well, hmmm.  Mmmaybe it WAS so bad, after all?  Even my Magic 8-Ball replied "It is decidedly so".  

I suspect Senator Baucus' deteriorating confidence in the success of Obamacare may have been a factor in his decision to retire from the Senate at the end of his term in 2014.  I also wonder if Senator Baucus' public criticism of Obamacare, especially his use of the descriptions "train wreck" and "Humpty-Dumpty," was a factor in prompting Mr. Obama to name him an Ambassador in 2014 and get him out of the country.  China, to be exact.

I think questions like these also help explain why history can be fun.

EpiPen: The EpiLogue

The other day, I linked to David Williams' insightful post countering the conventional EpiPen narrative. Turns out there's even more fallout:

"Mylan, said that the generic EpiPen would be available in several weeks and be identical to the existing product, which is used to treat severe allergic reactions. But it would have a wholesale list price of $300 for a pack of two, compared with just above $600 for the existing product."

As a friend noted today on Twitter, it's unclear on how they're going to compete with themselves and still come out ahead.

Not my monkeys, not my circus

[Hat Tip: Co-Blogger Bob V]

Healthcare is Different. Real Different.

Modern Healthcare has released its list of the top 100 most influential people in healthcare.  It's an annual list.

It's worth your time to scan the whole list.  As you do, don't overlook the fact that not one of the top 25 is a physician.

Not one.

Plenty of politicians, lawyers, MBA's, and accountants. Couple of nurses. A phys Ed. Major. Not one physician.

President Obama is #1. (Modern  Healthcare doesn't really say whether it distinguished between positive or negative "influence" assembling their list.). You'll also notice Loretta Lynch, Paul Ryan, John Roberts, even Bernie Sanders.  But not one physician.

Can anyone imagine the automotive industry's 25 most influential people not including even one senior mechanical engineer?  Or the 25 most influential construction executives not including even one experienced building contractor?  Or the 25 most influential American military figures not including even one general or flag rank officer?

But it's all good, because, you know, "Healthcare is different".

Bad News for Obamacare in Ohio

Ohio’s individual health insurance market is failing. In less than 12 months we have seen HealthSpan, InHealth, United Health Care, and Aetna exit the Obamacare Marketplace. Another insurer local to Northwest Ohio, Paramount, is reducing its footprint for their HMO products. Now comes official word that Medical Mutual will be eliminating all PPO products and will no longer participate in 65% of the state.

For people living in 19 counties choice is no longer an option. Anthem will be the sole insurer they can purchase a plan from. In 28 counties there will only be two insurance carriers to choose from – Anthem and one other. These 47 counties make up more than half the state of Ohio. This is a far cry from 2016 when Ohio boasted of having at least four insurers in every county.

MMO’s PPO plan elimination is even more important for those it will still serve. Their largest number of insured members were enrolled in a PPO product. The PPO network was very robust and allowed members to utilize several hospital systems and specialists. That choice is gone. Going in to 2017 the remaining insurers all utilize narrow networks. For consumers in some counties this means that they cannot have services from the local community hospital that serves them. For others it means that they will have to find new cardiologists or oncologists. This will be especially problematic for outlying communities.

The bad news doesn’t stop there. In addition to less choice, rate increases are estimated to rise nearly 13%. As the only statewide insurer, Anthem is seeking a 9.9% average increase for their plans. Overall this is less than the average but it is relevant to point out that they already had some of the highest rates in the state. Other insurers such as Medicaid managed care providers Caresource and Premier are seeking increases of 13.5% and 39% respectively. Now they will be taking on the additional risk coming from insurers who are losing their shorts in the Obamacare marketplace.

Higher rates, less insurers, and fewer providers. Exactly the opposite of what Obamacare promised.

Friday, August 26, 2016

Breaking Tar Heel State BX News [Updated]

As if North Carolina Blue Cross hasn't put itself in enough hot water, FoIB Jeff M tips us that the carrier has decided it doesn't really need (want?) a lot of new business:

Effective for the 2017 plan year (Open Enrollment '16), NC BX is paying $0 commission on new business coming from other carriers, $0 commission on BX re-writes, and a whopping 1% for newly insured folks.

More on this as it develops.

Oh! David Williams has an excellent counterpoint to conventional wisdom on the current EpiPen kerfluffle.

Thursday, August 25, 2016

STOLI: Lagniappe

We first blogged on "Dead Peasant" life insurance over 10 years ago:

"Stranger Owned Life Insurance (SOLI) is part of the “premium financing” phenomenon."

The concept certainly had its drawbacks: for one thing, it created (or could potentially create) a "moral hazard," tempting impatient beneficiaries with no familial or other personal connection to the insured.

But it had its uses, too: it enabled businesses to recover financially from the loss of key (or other) personnel. And there was this:

"Florida Atlantic University ... pays the premiums on life insurance policies for select boosters, who then name the university as beneficiary. The booster eventually shuffles off this mortal coil, leaving behind an endowed chair"

So, win-win.

But eventually the tide changed, and STOLI plans were outlawed. Which would have been the end of it, except for a nagging question: if all these plans are forced to go away through no fault of those who bought them, who gets all those premium dollars? On the one hand, the carrier assumed the risk in good faith, and (presumably) paid out one or more claims over the years. On the other, the folks who bought them certainly believed that the plans would eventually pay out, and didn't cancel them along the way.

On the gripping hand, "[t]wo federal appellate courts have affirmed, on different grounds, the cancellation of large life insurance policies ... permitting the issuing insurers to retain the premium paid for the policies."

Which is good news for the carriers, which had the use of the money for years, and now get to keep it completely risk free.

One wonders if there are any tax consequences to this.

Contrary to popular myth: The EpiPen story

Over at The Grey lady, Aaron Carroll (professor of pediatrics at Indiana University School of Medicine) has a helpful explication of how the current EpiPen kerfluffle came about. He outlines the history of how the EpiPen came into being, and its subsequent history. He notes that, although the active ingrecdient is relatively inexpensive, it's also "inherently unstable. Research shows that it degrades pretty quickly over time, and it’s recommended that EpiPens be replaced every year."

Which makes sense, and I'm generally in favor of keeping med's up-to-date, and of market forces to keep the price of said med's within reach. But as we saw with the Daraprim controversy, sometimes bad actors cause market distortions, and heartache.

We'll come back to that.

But first, it's important to note that Prof Carroll goes to great pains to lay out the timeline, and regulatory issues, which have ultimately lead to a relatively inexpensive - but indispensable - treatment fast becoming out of reach for everyday folks. It's a tale of government recalcitrance and provider avarice, but mostly government recalcitrance:

"[I]n 2010, federal guidelines changed to recommend that two EpiPens be sold in a package instead of one ... In 2013, the government went further. It passed a law that gave funding preferences for asthma treatment grants to states that maintained an emergency supply of EpiPens. As the near sole supplier of the devices, Mylan stood to make even more money."

Which is fine, but then the good Professor concludes:

"EpiPens are a perfect example of a health care nightmare. They’re also just a typical example of the dysfunction of the American health care system."

No, sir, it is most decidedly not that.

And how does your humble correspondent know this?

Well, when one digs a bit deeper, which Prof Carroll apparently did not do, one finds this little gem:

"If lawmakers follow the usual script, Bresch could get called up to Capitol Hill next month to explain her company’s justification for raising the price on the life-saving allergy shot. But that could be awkward, since she’s the daughter of Democratic Senator Joe Manchin of West Virginia."

So what Prof Carroll characterizes as an indictment of the (admittedly dysfunctional) health care system is really just a very simple, sordid example of rent-seeking, enabled by the powerful relative of the manufacturer's CEO.

Case closed.

Wednesday, August 24, 2016

More "Interesting" UL News

A few months ago we blogged on a lawsuit against TransAmerica Life regarding the cost of insurance (COI) in their Universal Life products. At the time, we noted that this was most likely an uphill battle, seeing as how every single UL contract specifically says that they can charge the maximum COI as stated in the policy.

Now, perhaps inspired by the TA litigation, policyholders of other carriers are also suing their insurers, citing much the same legal reasoning. Obviously, I'm sympathetic to their plight, but I'm also in favor of the rule of law, and contractual law in this case specifically.

The problem is this little phrase:

"[O]n top of the contract’s guaranteed maximum rates, express or implied contractual limitations serve as a check on discretion, prohibiting the insurer from considering factors other than mortality experience."

That is, carriers are constrained from using poor investment results as justification for increasing internal insurance costs. And I tend to agree with this: certainly, carriers should look to their portfolio's performance when deciding how much interest to credit, but this has nothing to do with mortality costs (that is, how many of their insureds died the previous year). It seems to me that if interest rates were driving mortality rates, we've got much bigger problems going on here.

No jumping out of windows, please.

Blogging for The Pelican State

Longtime readers may recall the extraordinary outpouring of support for those hit by Katrina; we were glad to help raise much needed funds for those most deeply affected.

Flash forward 11 years, and folks in Louisiana are once again facing devastating losses. I reached out to my old Cavalcade of Risk roster to see if any of those fine folks could help with an updated version of that 2005 project.

Thankfully, 'Ironman' came through, and has set up a page with all kinds of ways to help out:

"We've also selected a handful of charitable organizations that are focused on providing disaster relief across Acadiana, which are tied to national organizations that have been ranked highly by Consumer Reports and the Christian Science Monitor for their effectiveness in putting donated funds into real relief efforts."

This is just an outstanding response, and I would urge IB readers to head on over - Thank you, Ironman!

Tuesday, August 23, 2016

Death, Accidentally

So, working on a new (to me) group client, and one of the things we're looking at is the group term life insurance. They're currently with a carrier that's not known for this product (they tend to more individually-tailored plans), and so I asked about the rates. The client gave me the number, and I asked if that included Accidental Death and Dismemberment (AD&D), as well. She told me "I wish but it does not."

Which is fine, and helps me keep things in order (and perspective) as I'm putting together the quote. But it reminded me of a philosophical conundrum I've occasionally pondered: what's the deal with AD&D [ed: channeling Seinfeld, are we?]?

I ask because here's the premise of that product:

"So you're telling me that my widow/widower needs twice as much money if I get hit by a bus and die instantly than if I get cancer and endure a long, expensive death?"

Again, I don't think there's anything inherently wrong, evil or fattening about this type of coverage; I just don't understand why folks would pay extra for it. Now, if there was a rider that paid double for getting cancer or having a stroke...

But that's another post.

Monday, August 22, 2016

Nothing new under the Sun

We've been writing about Balance Billing and "PARE" claims for almost 11 years (here for example). Briefly, the issue is that there is essentially a class of providers who, although they may ply their trade inside a network-approved facility, are nonetheless not contracted with a given (or any). network. Thus, even if you carefully choose an in-network facility and surgeon (for example), odds are your anesthesiologist and radiologist are not in-network, and can charge you pretty much whatever they wish.

It's not a new problem, but that doesn't stop some folks from lamenting that it's just the latest way for providers to ding patients:

"It’s getting harder and harder to keep medical costs within your insurance network—even during a single hospital stay."

And they've coined a new term for the practice: "drive-by doctoring." This of course makes zero sense: generally, such providers are well-established, with good reputations and solid credentials. They've just figured out a sweet deal: become the only pathologist in a given hospital, refuse to join any network, and bill away. Now, whether or not this is "right" or moral or "fair" is up for discussion, but that it's a new phenomenon isn't.

To be fair, Slate does point out that some states (Pennsylvania, for instance) have protections against such practices (and we discussed the current state of the law nationally here).

There's really not a lot one can do about this, other than to just be aware, and then try to negotiate a better price (which may be difficult, seeing as how the services have already been delivered).

Cause & Effect (or Bye-Bye Choice): George Hamilton edition

Back in Aught '11, Bob noted that the ACA's "tanning bed tax" was slated to bring in some $200 million per year. Even 5 years ago, the reality fell far short:

"The first 9 months of 2011 has generated only $54 million which means the expected revenue will be less than half what was expected."

But that was then, and this is now:

"Tanning industry blames 10,000 salon closings on ObamaCare"

Naturally, shuttering over half of these businesses is going to further reduce the numbers projected by O'care enthusiasts. And tan-seekers aren't the only folks losing choice:

[Map Courtesy of New York Times - click to embiggen]

 "In many parts of the country, Obamacare customers will be down to one insurer when they go to sign up for coverage next year on the public exchanges."

As FoIB Reed Abelson reports, almost one-in-five victims O'Care participants will have (at most) one carrier from which to "choose." Kind of like Model T color choices, no?

Adding insult to injury, a handful of entire states will likely be down to a single carrier. So much for competition and bending the cost curve down. And so much for "choice."

Friday, August 19, 2016

More on Flood Insurance

"It won't happen to me"

Yeah, about that:

Courtesy of the Insurance Information Institute

End of the Week Miscellany

In no particular order:

We last noted how The Centennial State's move towards a Single Payer option threatened to send that state's budget "off a financial cliff." Well it turns out that there's one group in particular dead set agin' it. FoIB Holly R alerts us that "liberal group ProgressNow Colorado held a news conference ... to announce its opposition to the measure."

As I've repeatedly said, I'm all in favor of 58 individual state laboratories trying out new models. Seems to me a great way to get a sense of which ones hold promise, and which ones don't.

Aetna's bailing on huge swaths of the individual major medical market has had a devastating affect on at least one small Arizona community:

"People in Pinal County are at risk of a health insurance problem that hasn't happened anywhere else in the country: no companies offering marketplace health insurance"

Turns out, Aetna was the only carrier left standing in that area. And an overwhelming majority of those with plans qualified for a subsidy. Unfortunately, there seems to be nowhere to spend it.

And this is an interesting, if odd, little story from Across the Pond:

"There's an app that lets you buy restaurants' leftovers ... saving the good food from going to waste"

Here's how it works:

Why mention it? Well, it would seem like this idea might be very attractive here in the US, but it's likely liability concerns (not to mention health department rules) would be insurmountable.

Too bad, really.

Thursday, August 18, 2016

1,000 Words on LTCi: Providers

Courtesy of LifeHeathPro, where folks 85 and up receive long-term care services:

Health Wonk Review: Short & Sweet edition

Our favorite healthcare economist, Jason Shafrin, hosts this week's eclectic collection of health care policy and polity.

Methinks Jason sells himself short, though: it's full of great content.

Wednesday, August 17, 2016

Speaking of Flood Insurance

Courtesy of Jeanne Salvatore:

And more on how Flood Insurance works here.

Tacklin' the Toughies [UPDATED]

My favorite cases are the "tough" ones. It's not that I deliberately seek out difficult-to-write clients, they just seem to gravitate to me. The thing I like most about these is the opportunity to learn something new.

For several years now, colleagues (and marketers) have been urging me to offer Critical Illness (CI) plans. The problem was, I really could just never get my head around how to quote them, nor really "get" why I should. It's not that I had any ethical issues with these plans, I just had a mental block regarding them.

I was recently referred to a couple looking for Long Term Care insurance. As a result of the pre-screen process we use, it was pretty clear that Doug wouldn't qualify, but Denise would. My gurus at the Long Term Care Agency recommended a Critical Illness plan for Doug, and as soon as I saw the quote they emailed, I could feel the lightbulb over my head begin to glow: I 'got' it!

Here's why: For many years, I've used a bucket metaphor to explain how Universal Life plans work. The LTC Agency folks use it to explain CI plans:

As soon as I saw this, it became crystal clear. The plan pays a monthly benefit for folks who end up with cancer, stroke, even Alzheimer's (which is important: remember, we're talking about Long Term Care insurance alternatives here). And the plan's Guaranteed Issue, so we don't have to worry about Doug passing underwriting Well this is disappointing: the gentleman who recommended this plan to me, and whose agency I've been using for quite a few years as my primary LTCi resource, just told me that "oh, yeah, it's a voluntary benefit, have to have at least (so many) employees. And it's guaranteed issue if he gets past the knockout questions."

Um, Randy? Then it's not Guaranteed Issue. And now I look like an idiot. Good bye.


There are other features, as well (for example, alert readers may be wondering about that $216,000 benefit pool), but my point is that I seem to have found at least one more way to help folks with health issues fund potential Long Term Care expenses.

And I'd call that a win.

[Special IB Thanks to Randy G]

Sharing & Caring: A Veteran's Perspective

Once again, reader Brian J brings helpful insights, this time about health care sharing ministries and the VA

All those caveats about the "healthcare sharing ministry" are eerily reminiscent of what it’s like to be a military veteran with non-service-connected non-emergency medical needs.

If you’re a military veteran – and enrolled in the VA healthcare system (which does meet the minimum essential coverage standard) – you’re disqualified from obtaining subsidized medical coverage through the Obamacare marketplace. (If you’re married, the marketplace will give your non-veteran spouse coverage with a subsidy, but you – being enrolled in the VA healthcare system – would have to pay the full [unsubsidized] amount for ACA health insurance coverage.)

Now, one might ask why is that a bad thing? If the veteran already is enrolled in VA coverage that provides care that meets the minimum essential standard for health care coverage, why would the veteran be concerned about obtaining health insurance outside of the VA?

The reason is that (1) VA health coverage is not considered to be “health insurance” and (2) because of the healthcare eligibility “Priority Group” that the VA assigns a veteran when that veteran enrolls.

Years ago, when the VA realized that budgets were tight, they began a system of rationing health care, so that the veterans who needed health care assistance the most – and the ones who had made the greatest military sacrifice – obtained priority in coverage (and were assigned to higher “priority groups”). I think that was an appropriate and reasonable decision.

Here’s a link to a pamphlet that is produced by the VA that describes those priority groups.

But, what that means is that those veterans who do not qualify to a higher priority group based on their (lesser) military sacrifice are assigned to lower priority groups and are enrolled (and obtain coverage) determined by the amount of money Congress gives the VA each year, which then determines the amount of co-pay the veteran has to pay, and affects the healthcare services and benefits made available to the veterans in those lower priority groups. (If you’re assigned to Priority Group #7, you’re near the bottom of the list.)

I think there's a disconnect between what the ACA considers to be minimum coverage in the VA healthcare system and what healthcare benefits a veteran enrolled in one of the lower Priority Groups might actually be entitled to and paying for. (Basically, if you have a non-service-connected non-life-threatening injury – say, you get the sniffles or stub your toe and go to your primary care physician down the street -- the VA is not likely to pay for that treatment.)

The VA warns (advises) veterans to keep their private health insurance – if they have it – due to the risks of being in one of the lower priority groups. See the section titled “Risks of Giving Up Your Private Insurance” in this VA pamphlet.

Many low-income military veterans with non-service-connected medical needs are dis-enrolling from the VA Healthcare System in order to be eligible for enrollment in the ACA (Obamacare) and obtain subsidized coverage for themselves and their spouses. (At least until they become Medicare-eligible -- then, they're re-enrolling into the VA Healthcare system.)

Thanks again, Brian!

Tuesday, August 16, 2016

Is Medical Mutual of Ohio Losing or Winning?

Medical Mutual of Ohio, one of the largest insurers in the state, announced that with the 2017 open enrollment they will discontinue to offer PPO plans both on and off exchange. This has significant ramifications to Ohio's Obamacare marketplace with the biggest impact being that eliminating these plans reduces the counties that Medical Mutual will participate in from all 88 down to 31.

This is not what Medical Mutual wants to do, but is necessary to continue selling individual plans.

Overall this decision will eliminate insurance to 25% of their membership and cause an unknown (guessing very large) percentage of their membership to have to switch from a PPO plan to an HMO or POS plan. The POS plans will only be available in the Cleveland market while all other regions will be migrated to HMO plans.

Beside losing plans, members will also lose access to providers and facilities. At the top of the list of facilities no longer available is Cleveland Clinic. Unless you fall in one of the nine counties surrounding Cleveland (POS plans) you are out of luck. What if you want the James Cancer Center at OSU? Not if you are outside of Columbus. How about Bowling Green, Ohio's Wood County hospital? Sorry, they aren't even in the HMO networks available. The list goes on and on and we haven't even mentioned the potential loss of primary doctors and specialists.

The decision came down to survival. For 2014 and 2015 Medical Mutual lost a combined $175 million. Even with reinsurance payments of $125 million it still leaves them $50 million in the hole. Obamacare supporters and insurers expected to see claims slow down and the market to stabilize. Neither of these things have happened. Add to the mix reinsurance is ending, and insurers like Medical Mutual see that it is impossible for them to continue the same strategy in the marketplace.

The new strategy is simple. Limiting network choice and limiting where to do business is bound to reduce the unhealthy risk while also eliminating providers who are unwilling to lower their reimbursement rates.

Instead of Medical Mutual rolling out 45% increases to members they will send them cancellation notices. Those in the 31 counties where HMO's will be offered will see renewals that map them to new plans. These renewals will vary based on rating regions. For those going from PPO to POS (Cleveland area) they will see increases in the low teens. Those already in HMO products will see increases in single digits. The winners will be those going from PPO to HMO where significant rate decreases will be given.

It's the financial winners that will be the focal point. Obamacare supporters will point to the rate reductions as a product of the law working. Never mind the fact that it is only "working" by limiting the providers of care that are essential to the health of those Obamacare was supposed to protect the most.

If you like your plan: RIP

With all the news today about Aetna bailing on most on-Exchange individual health insurance business, this news is falling under the radar:

"Important Changes to Medical Mutual’s 2017 Individual Products

While Medical Mutual is firmly committed to Ohio and the Individual ACA market both on and off exchange, it is necessary for us to make changes to our 2017 individual health insurance products."

The regional carrier goes on to announce that, effective with the 2017 plan year, they're completely abandoning 57 of Ohio's 88 counties (almost 2/3's) altogether, and "mapping most of those remaining from PPO plans to the stricter HMO model.

The good news (such as it is) is that grandmothered and grandfathered plans aren't subject to these changes.

Co-blogger Patrick wonders:
1. How many people do they have covered on the exchange and off the exchange?
2. How many people will lose coverage?
3. How many people will lose their PPO plan but be able to migrate over to an HMO option?
MedMutual is hosting another webinar later this month, perhaps we'll have those answers then.

But remember:

UPDATE: Pat has more details on this breaking story.

Monday, August 15, 2016

Is Sharing (Really) Caring?

I was recently invited to represent a so-called "health care sharing ministry." These plans (about which Bob has written, most recently here) are considered ACA-"exempted" plans, meaning that although they don't meet the stringent ACA coverage requirements, they are nonetheless deemed "kosher" [ed: Heh] for ObamaTax purposes.

These plans essentially rely on the kindness of others to help folks pay for care. What's different (and somewhat appealing) with this one, offered by Altrua Healthshare is that it seems more structured than the ones I've seen previously, and from an agent's point of view, more attractive:
Broad Network
• EXEMPT from Affordable Care Act
• Purchase all year, not just during open enrollment
• Very affordable memberships
• Available in all 50 states
• Pays great commissions

That last is important, as carriers continue withholding commissions, especially for "off-season" enrollments.

There are several things I do like about this particular iteration: first, they are non-denominational, meaning that they are open to different "flavors" of Christianity. Of course, this leaves folks like yours truly out in the cold as far as actually joining, but it may be attractive to my Christian clients (which most are, of course).

I also like that they set things up to mirror ACA metallic tier plans: Gold, Silver, Bronze. And it seems affordable, with rates for even "Gold" level plans available in the low $200's (per month). This is at least partially due to the fact that it's medically underwritten:

"Some individuals may not be eligible or have a membership limitation due to certain past or present medical conditions."

Of course, I have some significant reservations, the most important of which is that this is not insurance (and to be fair, they make this perfectly clear up front):

"Altrua HealthShare members understand that Altrua HealthShare is NOT an insurance company and each member remains self-pay" [emphasis in original]

This presents a problem for me as an agent: if I recommend it, and the client blows past the $1 million lifetime maximum, or the plan fails to pay as set forth, then it seems to me that I've opened myself up to quite the E&O (Errors and Omissions) claim. It's rather like the argument about going "bare" in that I walk a very thin line between understanding a client's financial situation and recommending a potentially risky alternative.

A couple other thoughts from Bob:

First, the Idaho DOI shut down Altrua in the Gem State in 2011. It's not clear to me whether that's been resolved [ed: although the fact that it's touted as being available in "all 50 states" certainly implies that].

Second, he says "I like the concept, but hate the upside risk to client and and agent. I've suggested them in the past with caveats. A few have enrolled in a plan but none have really tested one yet."

And there's this:

"All low price insurance (and non-insurance) is great until you really need it."


[Hat Tip: Cornerstone]

Interesting UL "News"

I've long been a critic of first and second generation Universal Life plans. Which is not to say that they didn't have a role to play, just that I think they required more "hands-on" attention by insureds than they were really prepared (or encouraged) to take on.

One of the biggest challenges to older plans is that they often become "upside-down;" that is, the internal costs far exceed the premium and interest credited, and they quickly become very expensive. Compounding this are IRS rules that effectively quash any hope of recovery by limiting premiums to a level where the policy just can't sustain itself.

The problem is that, if one doesn't really "goose" the cash value the first few years, then by the time the problem (insufficient cash value) becomes clear, it's too late to correct.

Or so I thought.

Turns out that although carriers can't illustrate level premiums sufficient to carry the policy forward, there's a stipulation in the tax code that if a policy violates IRS guidelines, once the cash value has been drained you can pay the premium needed to cover the monthly cost of insurance deductions/expenses. You just can't build a significant amount of cash value.  So, you'd need to increase the premium each year as the cost of insurance deductions increase.

[ed: Link to relevant code is here, scroll down to 7702 f 6]

So, problem solved? Eh, to the extent that one can continue to pump cash into a quickly expiring insurance policy. The question then becomes whether that's really a good idea. Or it may be that this is the time to seriously consider selling the policy. Still, it's always nice to have options.

[Hat Tip: FoIB Sara S]

Friday, August 12, 2016

$plitting Dollars

It's hard to believe, but in over 11 years of blogging, we've never talked about the 'split dollar' life insurance funding technique:

"A split dollar plan allows an executive to obtain life insurance coverage using employer funds. The investment by your business in the plan is fully secured. If the insured employee dies or his or her employment is terminated, your business is reimbursed from the policy proceeds for its payment of premiums."

Now, why would an employer want to offer this? Well, it's a way to reward valuable employees (executives, key supervisors and the like) in a way that, unlike most benefits, doesn't require offering the same deal to everyone. Basically, the two parties (employer and employee) split the cost of coverage using whatever permanent type of coverage is appropriate (Universal or whole Life, for example).

It's an economical way to help a favored employee afford more long term coverage, and acts as "golden handcuffs" to entice him to stay. The concept itself has been used successfully for many years, and is generally well-accepted by the IRS.

But one can "up the ante" a bit by adding an "Inter-Generational" twist. These arrangements are generally family-directed. For example:

An elderly and permanently incapacitated mother acquired, on a lump-sum basis, life insurance on each of her three sons. The Tax Court was asked if this "would
be deemed a taxable gift to the extent that the premium payment exceeds the value of current life insurance protection."

That is, since the death benefit of the insurance policies would always be greater than the (one-time) premium paid, would that premium be taxable? The Court actually ended up ruling that it wouldn't.

Now, why is this interesting to those of us who don't have extremely wealthy (and desperately ill) parents? Because it reaffirms the basic value of the split dollar concept itself and, who knows, perhaps you'll one day be that wealthy orderly parent.

Not to mention that emphasizing the need for well-thought-out estate planning.

A Philosophical Conundrum:

A month ago, I blogged on a client whose premium was jumping from about $700 a month to $1,000. One of the options we discussed was "going bare;" that is, declining to buy any insurance. Now, he could have potentially then become subject to the ObamaTax, but even that is a small fraction of what that increase represents.

He ultimately chose to keep his existing coverage (since he'd already met his annual deductible and was anticipating some additional expenses), but our discussion really brought me up short.

It wasn't that long ago that I castigated the subject of a newspaper article for making the choice to roll the dice by deciding not to be insured.

So what changed?

Everything, really: under the UnAfforable Care Act, it seems to me that choosing not to buy insurance is a rational choice. Although I would never advise going this route (cf: E&O coverage) there are certainly circumstances in which I don't argue very forcefully on its behalf.

Let's take Max: his current plan comes with a (low, by today's standards) deductible, after which covered expenses are paid at 100%. If renewal wasn't an option, he would likely be looking at a $4,000 deductible plan with a monthly premium of $852. Which means paying out over $14,000 (on an annual basis) before the insurance paid penny one.

Well, that's not quite true, either: the first dollar benefits include an annual checkup, which is worth some small fraction of that $14 large. Oh, and birth control and maternity, as well. For a 64 year old guy.

He'd save about $700 in ObamaTax penalties, as well.

But you see where this is going, right? It's absolutely a reasonable, rational choice to take a pass on an ObamaPlan altogether. And I hate that I not only see this, but (reluctantly, to be sure) agree with it.