Tagged Insurers

Anthem Eases Up On Premium Hikes After State Scrutiny

Insurance giant Anthem Blue Cross agreed to reduce two planned premium increases for 2018 after California regulators questioned the company’s rationale for raising rates by as much as it had initially proposed.

The scaled-back rate hikes, in the individual and small-employer markets, will reduce premiums by $114 million, state officials said.

The California Department of Managed Health Care challenged Anthem’s estimates for future medical costs, in particular its prediction of a 30 percent jump in pharmacy expenses for the individual market — nearly double the estimates of two other big insurers and out of line with industry trends nationally.

As a result of the department’s intervention, the nation’s second-largest health insurer shaved 3 percentage points off its 2018 rate increase for individuals and families, still leaving a hike of 37.3 percent. That increase is the second-highest — after Molina Healthcare — among the 11 insurers that sell in the Covered California exchange. Anthem also cut its rate hike on small businesses by more than half, to 2.5 percent.

The smaller premium hikes are expected to save individuals about $21 million and small-business customers an estimated $93 million.

California’s two insurance regulators, the Department of Managed Health Care and an elected insurance commissioner, can pressure companies to reduce their rates, but neither has the authority to block rate hikes.

Shelley Rouillard, director of the managed care agency, said her department carefully scrutinizes rate filings to ensure “consumers are receiving value for their premium dollar. … Rate review is an important consumer protection and holds plans accountable to justify their rate increases.”

Anthem said in a statement that it works with regulators routinely “to revisit our assumptions and rates as more data becomes available … We are pleased that the emerging data allowed us to provide some rate relief to California individuals and small businesses versus what was originally filed.”

Regulators said that during their review of Anthem’s small-group rates, the company updated its projection for medical spending, which resulted in a lower premium increase than originally proposed.

For the individual market, regulators at the managed care department dug deeper into Anthem’s forecast for prescription drug use and spending. “This is a much higher pharmacy trend than we have seen with other carriers and we will need sufficient documentation to consider it reasonable,” they wrote to Anthem.

In response to the state’s questions, Anthem lowered its estimate of the rise in pharmacy costs by 7 percentage points, to 23 percent. That led, in part, to the reduced rate increase.

Like all California insurers, Anthem had been asked by state officials to submit two rate filings for the individual market. The lower set of rates assumed that the Trump administration would continue to pay so-called cost-sharing subsidies that help low-income consumers with out-of-pocket costs. The higher rate increases, which state officials adopted on Wednesday, assume President Donald Trump might make good on his threats to end those payments.

Anthem had sought a 35.4 percent increase under the lower rate scenario and a 40.6 percent hike with a surcharge tacked on to reflect the possible loss of subsidies. That higher rate proposal was the one Anthem reduced by 3 percentage points.

The state’s examination of Anthem echoed concerns raised by the advocacy group Consumers Union in a letter to regulators on Sept. 7. The group questioned why Anthem’s projections were so much higher than its competitors’ and asked the state to demand additional documentation from the company.

Dena Mendelsohn, a staff attorney for Consumers Union in San Francisco, said she welcomed any reduction of the rate increase. “We’re glad to see the pharmacy trend was brought down during the rate review process. That is exactly why we need such a rigorous rate review process,” she said.

However, the 37.3 percent average rate increase from Anthem still “poses a real concern for consumers,” especially those who do not qualify for federal tax credits that help pay for premiums, Mendelsohn said.

Some of the follow-up information Anthem submitted to regulators about its drug costs is under seal. The insurer claimed it contained confidential trade secrets that are protected from disclosure under state law.

The Department of Managed Health Care said it was looking into whether that information can be released publicly.

Another insurer, L.A. Care Health Plan, also faced questions from the managed care department. In response, the health plan dropped its proposed rate increase in the individual market by nearly 9 percentage points, to 21.7 percent. That would generate savings of $9 million, according to the state.

L.A. Care told regulators it was able to lower its rates after getting new information about the amount of federal cost-sharing subsidies it receives.

Health Net, whose rates for some plans were reviewed by the California Department of Insurance rather than the managed care agency, cut a proposed premium increase of 23 percent for individual policies nearly in half, to 12.1 percent. That yielded an estimated savings of $15.1 million, according to the insurance department.

Overall, Molina Healthcare has the highest rate increase for 2018 among insurers selling on the Covered California exchange, at 44.7 percent. Valley Health Plan comes in lowest at 9.8 percent.

Blue Shield of California, the largest insurer in the state exchange by enrollment, fell in between at 22.8 percent. HMO giant Kaiser Permanente will charge 11.6 percent more, on average, next year. (Kaiser Health News is not affiliated with Kaiser Permanente.)

This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

Categories: California Healthline, Cost and Quality, Health Industry, Insurance

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Anthem Eases Up On Premium Hikes After State Scrutiny

Insurance giant Anthem Blue Cross agreed to reduce two planned premium increases for 2018 after California regulators questioned the company’s rationale for raising rates by as much as it had initially proposed.

The scaled-back rate hikes, in the individual and small-employer markets, will reduce premiums by $114 million, state officials said.

The California Department of Managed Health Care challenged Anthem’s estimates for future medical costs, in particular its prediction of a 30 percent jump in pharmacy expenses for the individual market — nearly double the estimates of two other big insurers and out of line with industry trends nationally.

As a result of the department’s intervention, the nation’s second-largest health insurer shaved 3 percentage points off its 2018 rate increase for individuals and families, still leaving a hike of 37.3 percent. That increase is the second-highest — after Molina Healthcare — among the 11 insurers that sell in the Covered California exchange. Anthem also cut its rate hike on small businesses by more than half, to 2.5 percent.

The smaller premium hikes are expected to save individuals about $21 million and small-business customers an estimated $93 million.

California’s two insurance regulators, the Department of Managed Health Care and an elected insurance commissioner, can pressure companies to reduce their rates, but neither has the authority to block rate hikes.

Shelley Rouillard, director of the managed care agency, said her department carefully scrutinizes rate filings to ensure “consumers are receiving value for their premium dollar. … Rate review is an important consumer protection and holds plans accountable to justify their rate increases.”

Anthem didn’t immediately respond to a request for comment.

Regulators said that during their review of Anthem’s small-group rates, the company updated its projection for medical spending, which resulted in a lower premium increase than originally proposed.

For the individual market, regulators at the managed care department dug deeper into Anthem’s forecast for prescription drug use and spending. “This is a much higher pharmacy trend than we have seen with other carriers and we will need sufficient documentation to consider it reasonable,” they wrote to Anthem.

In response to the state’s questions, Anthem lowered its estimate of the rise in pharmacy costs by 7 percentage points, to 23 percent. That led, in part, to the reduced rate increase.

Like all California insurers, Anthem had been asked by state officials to submit two rate filings for the individual market. The lower set of rates assumed that the Trump administration would continue to pay so-called cost-sharing subsidies that help low-income consumers with out-of-pocket costs. The higher rate increases, which state officials adopted on Wednesday, assume President Donald Trump might make good on his threats to end those payments.

Anthem had sought a 35.4 percent increase under the lower rate scenario and a 40.6 percent hike with a surcharge tacked on to reflect the possible loss of subsidies. That higher rate proposal was the one Anthem reduced by 3 percentage points.

The state’s examination of Anthem echoed concerns raised by the advocacy group Consumers Union in a letter to regulators on Sept. 7. The group questioned why Anthem’s projections were so much higher than its competitors’ and asked the state to demand additional documentation from the company.

Dena Mendelsohn, a staff attorney for Consumers Union in San Francisco, said she welcomed any reduction of the rate increase. “We’re glad to see the pharmacy trend was brought down during the rate review process. That is exactly why we need such a rigorous rate review process,” she said.

However, the 37.3 percent average rate increase from Anthem still “poses a real concern for consumers,” especially those who do not qualify for federal tax credits that help pay for premiums, Mendelsohn said.

Some of the follow-up information Anthem submitted to regulators about its drug costs is under seal. The insurer claimed it contained confidential trade secrets that are protected from disclosure under state law.

The Department of Managed Health Care said it was looking into whether that information can be released publicly.

Another insurer, L.A. Care Health Plan, also faced questions from the managed care department. In response, the health plan dropped its proposed rate increase in the individual market by nearly 9 percentage points, to 21.7 percent. That would generate savings of $9 million, according to the state.

L.A. Care told regulators it was able to lower its rates after getting new information about the amount of federal cost-sharing subsidies it receives.

Health Net, whose rates for some plans were reviewed by the California Department of Insurance rather than the managed care agency, cut a proposed premium increase of 23 percent for individual policies nearly in half, to 12.1 percent. That yielded an estimated savings of $15.1 million, according to the insurance department.

Overall, Molina Healthcare has the highest rate increase for 2018 among insurers selling on the Covered California exchange, at 44.7 percent. Valley Health Plan comes in lowest at 9.8 percent.

Blue Shield of California, the largest insurer in the state exchange by enrollment, fell in between at 22.8 percent. HMO giant Kaiser Permanente will charge 11.6 percent more, on average, next year. (Kaiser Health News is not affiliated with Kaiser Permanente.)

This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.

Categories: California Healthline, Cost and Quality, Health Industry, Insurance

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Long-Term Disability Insurance Gets Little Attention But Can Pay Off Big Time

“It won’t happen to me.” Maybe that sentiment explains consumers’ attitude toward long-term disability insurance, which pays a portion of your income if you are unable to work.

Sixty-five percent of respondents surveyed this year by LIMRA, an association of financial services and insurance companies, said that most people need disability insurance. But the figure shrank to 48 percent when people were asked if they believe they personally need it. The proportion shriveled to 20 percent when people were asked if they actually have disability insurance.

As the annual benefits enrollment season gets underway at many companies, disability coverage may be one option worth your attention.

Michelle AndrewsInsuring Your Health

Some employers may be asking you to pay a bigger share or even the full cost. That can have a hidden advantage later, if you use the policy. Or you may find that your employer has automatically enrolled you — or plans to — unless you opt out. A growing number of employers are going that route to boost coverage that they feel is in their employees’ best interests, not to mention their own, since insurers usually require a minimum level of employee participation in order to offer a plan.

Benefits consultants agree that although long-term disability coverage lacks the novelty appeal of some other benefits that companies are offering these days — hello, pet insurance — it can prove much more valuable in the long run.

“This is a really critical safety-net benefit,” said Rich Fuerstenberg, a senior partner at human resources consultant Mercer.

If you become disabled because of accident, injury or illness, long-term disability insurance typically pays 50 to 60 percent of your income, while you’re unable to work. The length of time the policy pays varies; some policies pay until you reach age 65.

Long-term disability generally has a waiting period of three or six months before benefits kick in. That period would be covered by short-term disability insurance, if you have it.

Many long-term disability claims are for chronic problems such as cancer and musculoskeletal conditions. According to the Council for Disability Awareness, the average duration of a claim is nearly three years — 34.6 months.

Not everyone has savings to support them through that time. When the Federal Reserve Board surveyed adults about household economics in 2015, 53 percent said they don’t have a rainy day fund that could cover them even for three months. More troubling, nearly half of respondents — 46 percent — said that faced with a hypothetical $400 emergency expense, they didn’t have the cash to cover it.

According to the Social Security Administration, 1 in 4 people who are 20 years old now will be disabled before they reach age 67.

Overall, 41 percent of employers offer long-term disability insurance, according to LIMRA, though the proportion of larger employers who offer it is generally much higher. Compared with health insurance, premiums cost a pittance — $256 annually in 2016 on average for group plans, LIMRA says. Many employers pick up the whole tab or charge workers a small amount.

However, as employers continue to shift benefit costs onto employee shoulders, long-term disability is no exception. Increasingly, they’re offering the coverage as a “voluntary” benefit, meaning employees pay the entire premium.

The upside is that if employees pay for the coverage themselves with after-tax dollars and they ever become disabled and need to use the coverage, the benefits will be tax-free.

“If an employee can choose to pay for coverage on a post-tax basis, or is paying on a voluntary basis, it’s better for them,” said Jackie Reinberg, national practice leader for absence, disability management and life at benefits consultant Willis Towers Watson.

Some employers may pay for a core basic benefit that replaces 40 or 50 percent of income and offer workers the opportunity to “buy up” to more generous income replacement of 60 or 70 percent.

Although voluntary coverage has a tax advantage, disability consultants are concerned that leaving it up to employees, especially if they’re choosing among several other voluntary coverage options like cancer insurance, critical illness coverage and yes, pet insurance, increases the odds they’ll skip buying long-term disability coverage.

“These coverages all feel the same, and if you’re going to choose one at all you tend to go with the one that’s cheapest and the one that you think you might use,” said Carol Harnett, president of the Council for Disability Awareness, a membership group of disability insurers that does education and outreach about disability issues.

Auto-enrollment can make a big difference. Employers that auto-enroll employees in voluntary long-term disability plans may get 75 percent of employees to participate, compared with 30 percent for employers that leave it completely up to workers, said Mike Simonds, CEO of disability insurer Unum US.

If you were offered long-term disability coverage when you were hired and didn’t sign up, it may be tougher to do so during the open enrollment period, said Fuerstenberg. A growing number of health plans require employees to show “evidence of insurability,” meaning they must answer a series of health-related questions before they’re approved. Some long-term disability policies may also have preexisting condition provisions that won’t pay benefits for a condition for up to a year, for example.

Please visit khn.org/columnists to send comments or ideas for future topics for the Insuring Your Health column.

Categories: Insurance, Insuring Your Health

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