California Broker July 2016 by California Broker Magazine

VOLUME 34, NUMBER 10

SERVING CALIFORNIA’S LIFE/HEALTH PROFESSIONALS & FINANCIAL PLANNERS

JULY 2016

Toothy Toons Our Annual Dental Survey

AN ANIMATED LOOK AT HOW TO FIND THE FITTEST DENTAL PLANS FOR YOUR CLIENTS!

Also Inside:

Covered California • ACA Annuities • ACA Flex Credits COBRA • Medicare Telehealth • Self-Funding Critical Illness

Are Your Clients Singing Your Praises?

Happy HR/ Benefits Manager

Happy Group Administrator

Happy Business Owner

Give yourself A Great Reason to Smile.SM Call your dedicated account manager today. You and your clients will be promptly served with high value, Quality Assured group dental coverage.

(800) 248-8108

www.dentalhealthservices.com

3833 Atlantic Ave., Long Beach, CA 90807

Knowledge is Power Get the Advantage with Electronic Enrollment

Empower your clients with information at their fingertips

Electronic enrollment and benefit administration offered by Dickerson • Electronic enrollment forms collected and stored • Enrollment, eligibility and waiver reports instantly • Employee onboarding with document library • Renewal data at-a-glance

www.thebrokersga.com License #0F69768

Connect with Us on LinkedIn

TABLE OF CONTENTS 10

PUBLISHER Ric Madden email: publisher@calbrokermag.com

SENIOR EDITOR Leila Morris email: editor@calbrokermag.com

Flex Credits for Section 125 Plans 14 ACA How Flex Credits and Opt Out Cash

ffect Health Plan Affordability A Standards by Toney Chimienti On December 17, 2015, the IRS issued notice Notice 2015-87. Among other things, it lays out which employer contributions can be counted toward the ACA’s minimum affordability standards for employer sponsored coverage.

ART DIRECTOR/PRODUCTION MANAGER Steve Zdroik ADVERTISING Scott Halversen, V.P. Mktg. email: scotthalversen@calbrokermag.com CIRCULATION email: calbrokermag@calbrokermag.com BUSINESS MANAGER Lexena Kool email: lex@calbrokermag.com

EDITORIAL AND PRODUCTION: McGee Publishers 217 E. Alameda Ave. #207 Burbank, CA 91502 Phone No.: 818-848-2957 email: calbrokermag@calbrokermag.com.

California Broker (ISSN #0883-6159) is published monthly. Periodicals Postage Rates Paid at Burbank, CA and additional entry offices (USPS #744-450). POSTMASTER: Send address changes to California Broker, 217 E. Alameda Ave. #207, Burbank, CA 91502. ©2016 by McGee Publishers, Inc. All rights reserved. No part of this publication should be reproduced without consent of the publisher. No responsibility will be assumed for unsolicited editorial contributions. Manuscripts or other material to be returned should be accompanied by a self-addressed stamped envelope adequate to return the material. The publishers of this magazine do not assume responsibility for statements made by their advertisers or contributors. Printed and mailed by Southwest Offset Printing, Gardena, CA.

4 | CALIFORNIA BROKER

TELEHEALTH

How to Build a Telehealth Strategy that is Loved and Renewed by Scott Sanford The benefits of offering a stand-alone telehealth plan. ACA

The End Of The Affordable Care Act? by John Sarich No matter how noble, altruistic, and politically correct a government program can be in addressing some problems, the solution usually lies somewhere other than in another bureaucratic fix

How to Gain a Competitive Edge in the Medicare Market Place by Seth Paul The Medicare sales industry is highly competitive, here are five ways to gain a competitive advantage as a Medicare sales broker.

SELF-FUNDING

Self-Funding Is Here. Are You Ready? by Chris Moyer More and more groups are asking about self-funding their health plans. This could be music to your ears, or it could be your worst nightmare.

MEDICARE

- CalBrokerMag.com -

ANNUITIES

Selling the Flexible Benefits of a Fixed Deferred Annuity by Rich Lane A fixed deferred annuity is an attractive option for clients who want to make the most of their investment while supporting various financials goals.

Five Common COBRA Mistakes to Avoid by Dan Taylor Making a COBRA mistake with one employee could lead to serious financial distress or even bankruptcy..

ALSO IN THIS ISSUE:

DENTAL

Toothy Toons: Our Annual Dental Survey An Animated Look at How to Find the Fittest Dental Plans for your Clients! by Leila Morris The states top dental providers answer questions concerning plan coverages.

COBRA

Complexity of COBRA Holds True for Three Decades by Lisa A. Turner How to stay current and diligent with your COBRA processes and procedures.

LEGAL EDITOR Paul Glad

Subscriptions and advertising rates, U.S. one year: $42. Send change of address notification at least 20 days prior to effective date; include old/new address to: McGee Publishers, 217 E. Alameda Ave. #207, Burbank, CA 91502. To subscribe online: calbrokermag.com or call (800) 675-7563.

Covered California – Keeping Your Small Group Out of the Penalty Box by Chris Patton The recent expansion of the small group definition has led to new requirements, new definitions, new access to health benefit offerings, and newly improved products.

JULY 2016 EDITOR-IN-CHIEF Kate Kinkade, CLU, ChFC email: editor@calbrokermag.com

HEALTHCARE

CRITICAL ILLNESS

Why More Companies are Offering Critical Illness Protection Plans by Gary Harger A newer voluntary benefit that many employers are now offering is critical illness protection.

Guest Editorial..........................6 Annuity Sampler......................8 New Products....................... 42

News........................................ 43 Classified Advertising........ 46 Ad Index.................................. 46

JULY 2016

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GUEST EDITORIAL EDITORIAL

by Scott Halversen

THE LAST INNING FOR OUR FAVORITE RIGHT-HANDER

ur California B roker team lost Dave Leveque on May 28th. Dave had been pitching the magazine for the past 25 years. Dave was the ace righty in our sales and marketing rotation. Dave was a pro in every sense of the word. He was all about faith, family, hard work and baseball. Dave was a wonderful person to know – he had a great sense of humor, cared about you and your family, and was extremely honest. Dave was a star pitcher at Canoga Park High School. He was a Don Drysdale type hurler who liked to keep hitters from crowding the plate. His biggest victory was winning the heart of Becky Lohnes, one of the high school drill team members, and Dave's biggest cheerleader. They were teammates for 46 years. Dave was a pitcher on the Valley State Baseball team (later to become California State University Northridge) that won the NCAA College World Series in 1970. All the team stayed very close over the years. You could say Dave spent some time in the instructional league. He 6 | CALIFORNIA BROKER

taught in junior high school for five years. Later on he was involved in ad sales for Weider Publishing and Creative Age Publications. Dave learned the insurance game with RGV insurance. He went on to start his own agency, Dave Leveque Insurance Services. We picked up Dave in the 1991 expansion draft when he responded - CalBrokerMag.com -

to a classified ad in the magazine. Every day was a doubleheader for Dave. Each morning he came in and pitched the magazine, then made a road trip to his office to pitch his insurance business. We often teased Dave about being a double agent. Dave and Becky were blessed to have three great boys: Chris, Tim and Michael. He coached them from Northridge Little League through the Senior Majors. He touched a lot of lives over his 25year coaching career. Dave was a great teammate for Becky as she worked to support the Devonshire police and many community causes. It seems only fitting that Dave and Becky's son, Tim Leveque, is the Minor League Pitching Coordinator for the St. Louis Cardinals' Major League Baseball Team. Dave's pitches made it to the Major Leagues. We know that Dave is pitching for the a ngels now. H Scott Halversen is VP of Marketing at California Broker Magazine.. JULY 2016

ANNUITY SAMPLER

JUNE 1, 2016 Ratings Product Company Name Bests Fitch S&P (Qual./Non-Qual.)

Type SPDA Initial Guar. Bailout FPDA Interest Period Rate Surrender Charges

Mkt. Val. Min. (y/N) Contrib.

American Equity A- A- ICC13 MYGA (Guarantee 5) (Q/NQ) S 2.25%* 5 yr. None 9%, 8, 7, 6, 5, 0 Yes ICC13 MYGA (Guarantee 6) (Q/NQ) S 2.45%* 6 yr. None 9%, 8, 7, 6, 5, 4, 0 Yes ICC13 MYGA (Guarantee 7) (Q/NQ) S 2.70*% 7 yr. None 9%, 8, 7, 6, 5, 4, 3, 0 Yes

Comm. Street (May Vary)

$10,000 (Q) & 3.00%, age 0-75 & $10,000 (NQ) 2.10%, age 76-80** $10,000 (Q) & 3.00%, age 0-75 & $10,000 (NQ) 2.10% age 76-80** $10,000 (Q) & 3.00%, age 0-75 & $10,000 (NQ) 2.10%, age 76-80**

*Effective 6/7/16. Current interest rates are subject to change on new issues. **Commission may vary by issue age and state. See Commission Schedule for details

American General Life A A+ A+ American Pathway S 2.05%*a 5 yr. None 8%, 8, 8, 7, 6, 5, 4, 3, 2, 1, 0 Yes $10,000 (Q &NQ) 1.5% age 0-75 Insurance Companies Solutions MYG 2.25%*b .75% age 76-85 *CA Rates Effective4/05/16. First year rate includes 1.50% interest bonus. a (less than $100K ; b (100K or more) (*Guarantee Return of Premium) (Q/NQ) American General Life A A+ A+ American Pathway S 1.20%*a 5 yr. None 9%, 8%, 7%, 6%, 5%, 0% No $5,000 (NQ) 2.00% age 0-85 Insurance Companies Fixed 5 Annuity 1.40%*b $2,000 (Q) 1.00% age 86-90 (*Guarantee Return of Premium) (Q/NQ) *CA Rates Effective 3/14/16. Includes 2.00% 1st year bonus, 1.00% base rate subsequent years. a (less than $100K) b(100K or more) American General Life A A+ A+ American Pathway Insurance Companies Fixed 7 Annuity

1.85%*a 5 yrs. 2.05%*b

None

9%, 8%, 7%, 6%, 5%, 4%, 2%, 0% No

$5,000 (NQ) 3.00% age 0-85

1.50% age 86-90 *CA Rates Effective 3/14/16. First year rate includes 4.0% bonus 1st year. a (less than $100K) b(100K or more)

Great American Life A A+ A+ SecureGain 5 (Q/NQ) S 2.10% 5 yrs. N/A 9%, 8, 7, 6, 5 Yes $10,000 Effective 2/15/16. Includes .25% first-year bonus and is for purchase payments over $100,000. Escalating five-year yield is 2.10%. For under $100,000 first-year rate is 1.95%. Escalating rate five-year yield 1.95%.

2.50% 18-80 (Q), 0-80 (NQ) 1.50% 81-89 (Q&NQ)

Great American Life A A+ A+ SecureGain 7 (Q/NQ) S 2.40% 7 yrs. N/A 9%, 8, 7, 6, 5, 4, 3 Yes $10,000 Effective 2/15/16. Includes 1.00% first-year bonus and is for purchase payments over $100,000. Escalating seven-year yield is 2.29%. For under $100,000 first-year rate is 2.30%. Escalating rate seven-year yield 2.19%. Great American Life A A+ A+ Secure American (Q/NQ) S 1.50%* 1 yr. N/A 9%, 8, 7, 6, 5, 4, 3 No $10,000

3.50% 18-80 (Q), 0-80 (NQ) 1.50% 81-85 (Q&NQ)

*Effective 2/15/16. Eff. yield is 2.52% based on 1.50% first year rate, 1.00% available portion of 10% annuitization bonus (available starting in contract year two) and 0.02% interest on available portion of bonus at the rate of 1.50%. Surrender value interest rate 1.50%. Accepts additional purchase payments in first three contract years. COM12255

The Lincoln Insurance Company

A+ AA AA MYGuarantee Plus 5

The Lincoln Insurance Company

A+ AA AA MYGuarantee Plus 6

The Lincoln Insurance Company

A+ AA AA MYGuarantee Plus 7

The Lincoln Insurance Company

A+ AA AA MYGuarantee Plus 8

1.00%* 5 yr.

None

7%, 7, 6, 5, 4, 0

Yes

5.75% 0-70 4.65% 71-80 4.40% 81-89

$10,000 (Q/NQ)

**Rates Effective 5/1/16 for premium less than $100,000 and are subject to change

1.25%* 6 yr.

None

7%, 7, 6, 5, 4, 0

Yes

$10,000 (Q/NQ)

*Rates Effective 5/1/16 for premium less than $100,000, 1.40% for premiums greater than $100,000. . Both rates are subject to change

1.40%* 7 yr.

None

7%, 7, 6, 5, 4, 3, 2, 0

Yes

$10,000 (Q/NQ)

**Rates Effective 5/1/16 for premium less than $100,000 and are subject to change

1.40%* 8 yr.

None

7%, 7, 6, 5, 4, 0

Yes

$10,000 (Q/NQ)

*Rates Effective 5/1/16 for premium less than $100,000, 1.55% for premiums greater than $100,000. Both rates are subject to change

North American Co. A+ AA- A+ Gaurantee Choice (Q/NQ) S for Life and Health

2.50%*a 5 yr. None 10, 10, 9, 9, 8 Yes $2,000 (Q) 2.50% (0-80) 2.75*b $10,000 (NQ) 1.875% (81-85) *CA rates effective 6/2/16 â&#x20AC;&#x201C; a (less than $200K) b(200K or more) 1.25 (86-90)

Reliance Standard

3.25%* 1 yr.

A+

A Eleos-MVA

None

8%, 7, 6, 5, 4

Yes

$10,000

3.25%**

*Effective 6/2/16. Includes 1.50% 1st yr. bonus. Min. guarantee is 1.00%. **Reduced 20% ages 76-80, and 40% ages 81-85

Reliance Standard

A+

A Apollo MVA (Q/NQ)

4.20%* 1 yr.

None

9%, 8, 7, 6, 5, 4, 2

Yes

$5,000

4.00% to age 75**

Includes 2.00% 1st yr. bonus. Min. guarantee 1.00% **Reduced 20%, ages 76-80, and 40% ages 81-85. Effective 2/13/16

Symetra Life, Inc.

A A

A Custom 7 (Q/NQ)

2.65%* 7 yrs.

N/A

8%, 8, 7, 7, 6, 5, 4, 0

$10,000

Varies

*Effective 5/17/16. 2.15% base rate with no guaranteed return of purchase payments. Plus 0.50% bonus for $250,000 and above.

8 | CALIFORNIA BROKER

- CalBrokerMag.com -

JULY 2016

Are Your Health Sales Giving You that Sinking Feeling?

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HEALTHCARE

Keeping Your Small Group Out of the Penalty Box

by Chris Patton

he recent expansion of the small group definition has led to new requirements, new definitions, new access to health benefit offerings, and newly improved products. Those of us who have been in the industry long enough have learned that change is inevitable. We have also learned how to thrive on change. As with any change, the passage of SB125 is not without challenges. It is crucial to understand your clients’ business structure and benefit goals to navigate the gray areas of group insurance requirements, avoid significant penalties, and find optimal solutions. Shifts in requirements, such as the new definition of small group, can leave a ripple of startled clients in their wake – along with a hefty penalty for not knowing the rules. California’s group insur ance requirements are largely different than in the early 1990s when Assembly Bill 1672 first defined small group protections and eligibility for health benefits. Eligible employees were considered those with full-time, permanent status. Companies with 50 or fewer eligible employees were considered small group. They benefited from guaranteed issue, meaning that qualified small employers could not be denied coverage regardless of their claims experience. Small groups 10 | CALIFORNIA BROKER

also had the advantage of a premium cap that could not fluctuate more than 10% from the rates that health insurance carriers were required to file with state regulators. Employers with over 50 eligible employees were subject to terms dictated by the large group market. These terms were often unfavorable to companies with adverse claims experience. - CalBrokerMag.com -

FULL-TIME EMPLOYEE VS. FULLTIME EQUIVALENT EMPLOYEE For years, we looked at full-time status employees as the benchmark for determining group size, eligibility, and participation. But the definition of small group changed in January 2016 under the Affordable Care Act (ACA) JULY 2016

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HEALTHCARE and implemented in California with the passage of Senate Bill 125. In the ACA world, employers must now count the number of full-time employees and full-time equivalent (FTE) employees, meaning that part-time and seasonal workers must be included to determine group size. Small group parameters were expanded in California to include companies with 100 or fewer full-time equivalent employees, extending some of the perks that small groups had before the ACA’s implementation. So how do you calculate group size to determine whether a firm is considered a small employer or an applicable large employer? A full-time employee works an average of 30 hours a week for any calendar month (or at least 130 hours of service). A full-time equivalent employee is a combination of employees, each of whom is not a full-time employee, but who, in combination, are equivalent to a full-time employee. Some considerations add complexity to this calculation. For example, there are specific guidelines for businesses that employ seasonal workers, have employees with military coverage, or have common ownership. It is important to understand these rules in formulating accurate FTE employee counts to avoid ACA penalties and determine where group size puts your clients on the eligibility scale. To add to the confusion, an employer with 50 to 100 FTE employees can be a small employer with respect to health coverage and a large employer with respect to ACA penalties. This brings us to the important distinction between small group employers. If your client has fewer than 50 FTE employees, there are no ACA mandates or penalties for not offering health benefits. But offering these benefits can boost retention and attract talent. However, companies with 50 or more FTE employees are considered applicable large employers and are subject to ACA mandates and the associated penalties. And these penalties are steep. An applicable large employer faces a penalty if it does not offer minimum essential coverage to at least 95% of its full-time employees and their dependents. Suppose that an applicable large employer fails to offer this cover12 | CALIFORNIA BROKER

age and a full-time employee goes to a health insurance exchange and gets a premium tax credit. The employer would be required to pay a $2,000 penalty per full-time employee annually (excluding the first 30 full-time employees). What if an applicable large employer offers minimum essential health coverage that is not compliant with ACA guidelines for plan design and affordability? The employer would

"A combined portfolio of public exchange options with group and individual offerings allows companies to provide a complete package, covering fulltime status eligible employees and dependents as well as part-time workers with options from the individual marketplace." owe $3,000 for each full-time employee who gets a premium tax credit at a health insurance exchange. The applicable large employer can only be responsible for the lesser of the two types of penalties, not both. DOES THE NEW GRAY AREA HAVE A SILVER LINING? There is a new gray area with groups that have more than 100 FTE employees. In the pre-ACA environment, groups with 50 or more employees often fell into a gray area of product availability and eligibility rules. Today’s groups are required to provide health coverage to employees, but some have far fewer or no eligible, full-time status employees who can enroll. Suppose that a company has 105 FTE employees, but only 30 full-time status, eligible employees. The employer would not be eligible for small group health coverage or be a suitable candidate for large group products. In many cases, this situation would yield a highly unfavorable price for health coverage since the group would not be a viable candidate - CalBrokerMag.com -

for a non-guaranteed issue product. Another notable example would be a group that qualifies as an applicable large employer due to FTE employee count, but does not have any full-time status employees who are eligible for coverage. The employer would be subject to the ACA mandate, but would not have to offer coverage to part-time employees if this coverage had not already been established as a benefit guideline for the company. This example comes with a word of caution. Reducing hours just to eliminate benefits can be problematic. A recent class action lawsuit cited an employer’s strategy to decrease hours to avoid providing benefits or paying a penalty. These examples illustrate real challenges for employer groups. As agents, we need cross disciplinary expertise in insurance regulations and IRS guidelines. Despite the muddy situation for some unique large group cases, the ACA expansion brings a silver lining. Cue a sigh of relief. The flexibility of the exchange world, which was once reserved for the small and very large groups, is now available to employers with 50 to 100 FTE employees. Although access to an exchange is not new in the pre-ACA small group market in California, choice of product offerings has been greatly enhanced with the recent change in the small group definition. Eligible groups will find ACA compliant benefits from popular health insurance companies, employer control over benefit budgets, and multiple coverage choices for employees. This is a win-win for everyone. A combined portfolio of public exchange options with group and individual offerings allows companies to provide a complete package, covering full-time status eligible employees and dependents as well as part-time workers with options from the individual marketplace. H Chris Patton has over 15 years of industry experience in the California market with knowledge of the retail and wholesale distribution of group health insurance products. As the vice president of Sales for Covered California for Small Business, Chris and his team are staffed statewide to support the role of Covered California’s certified insurance agent community and to ensure the successful and ongoing distribution of California’s small business public exchange program. JULY 2016

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HEALTHCARE

HOW FLEX Health Plan CREDITS AND Affordability OPT-OUT CASH WILL AFFECT Standards by Toney Chimienti

n December 17, 2015, the IRS issued notice Notice 2015-87. Among other things, it lays out which employer contributions can be counted toward the ACA’s minimum affordability standards for employer sponsored coverage. The guidance has been much anticipated by employers that offer flex contributions to a Section 125 plan and employers that offer opt-out payments to employees who decline major medical coverage. The ACA’s Employer Shared Responsibility provision penalizes employers that offer no coverage or coverage that does not meet minimum value and affordability standards. Penalties apply to firms with 50 or more full-time equivalent employees. An employer would face penalties under these circumstances: • The full-time employee qualifies for and receives financial assistance to purchase coverage in an ACA marketplace plan, and • The employer-sponsored health cov erage is not affordable for the fulltime employee. Coverage is not deemed affordable if the employee must contribute more than 9.5% of their household income (adjusted yearly for inflation). Employer health flex contributions do count toward affordability under these circumstances: • The employee is able to use the contribution to purchase ACA qualifying 14 | CALIFORNIA BROKER

medical coverage. • The employee can only use the contribution to purchase medical care (including qualifying dental and vision) as defined by Internal Revenue Code section 213. The employee does not have the option to use the contribution to pay for non-health care benefits, such as dependent care or life insurance. • The employee does not have the option to receive the contribution as a taxable benefit (cash). - CalBrokerMag.com -

IS THERE TRANSITION RELIEF FOR THE 2015 AND 2016 PLAN YEARS? The good news is that the IRS also announced transition relief to delay enforcement of the new rules for employer contribution plans that were in place before the regulations were announced. For plan years beginning before January 1, 2017, the flex contribution is available for employees to pay for health coverage. If the employer qualifies for transition relief, the contribution will reduce the employee’s JULY 2016

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HEALTHCARE required contribution. The contribution arrangement must have been in place before the notice was released. In other words, if a health flex contribution arrangement, offering non-health benefits, was adopted after December 16, 2015, there is no transition relief. Employers that want transition relief should not substantially increase the flex credit contributions they offer to employees. A substantial increase that occurred after December 16, 2015 will make the employer ineligible for relief. WHEN WILL OPT-OUT PAYMENTS INCREASE THE EMPLOYEE’S REQUIRED CONTRIBUTION? The new guidance also addresses cash payments that are only available to employees if they decline medical coverage. These payments are often referred to as “opt-out cash” or “cashin-lieu.” What if an employee has to give up a cash payment to enroll in employer sponsored coverage? According to the IRS, that amount must be added to calculate the employee’s required contribution. The opt-out payment increases the employee’s required contribution. It penalizes employers for having an opt-out payment policy. For example, an employee with a $200 a month premium payment who gives up the chance to receive a $50 a month opt-out payment actually has a required contribution of $250 a month. When calculating the employee’s required contribution, the following types of opt-out payments must be added to the employee’s paid contribution: • Payments that cannot be used to pay for coverage under the employer’s plan. • Payments that are only available if the employee declines coverage. WHAT IF AN EMPLOYER ATTACHES CONDITIONS TO THE OPT-OUT PAYMENT? Some employers require employees to meet certain conditions to get opt-out payments, such as requiring employees to demonstrate coverage under their spouse’s plan. The guidance indicates that the IRS may treat such conditions differently in future guidance. The notice states that the IRS intends to propose additional regulations. 16 | CALIFORNIA BROKER

IS TRANSITION RELIEF AVAILABLE FOR THE 2015 AND 2016 PLAN YEARS? Yes, until future guidance is released, the following holds true for plan years beginning before January 1, 2017: An opt-out payment will not be treated as increasing an employee’s required contribution for purposes of penalties under the Employer Mandate. But the opt-out arrangement must have been adopted by December 16, 2015. Optout arrangements adopted after December 16, 2015 are not eligible for transition relief.

tions or opt-out payment arrangements that were adopted for plan years prior to January 1, 2017, can rely on transitional relief in preparing their 2015 IRS reports. Employers are advised to review the requirements for the transition relief with tax or legal counsel to confirm their eligibility. Some employers took advantage of the transition relief to report a lower amount as the employee’s required contribution on the 2015 IRS reports (Form 1095-C), which were issued to employees and filed with the IRS in

Most employers with flex contributions or opt-out payment arrangements that were adopted for plan years prior to January 1, 2017, can rely on transitional relief in preparing their 2015 IRS reports.

early 2016. They have been encouraged to notify employees that their required contribution may be higher if calculated without relying on the transitional guidance. What if the employee’s modified required contribution is higher without transition relief? The employee may still be eligible for a premium tax credit regardless of the required contribution or qualifying offer information reported on the employee’s Form 1095-C. H

WHAT DOES THIS MEAN FOR 2015 EMPLOYERS REPORTING UNDER IRC SECTION 6056? Most employers with flex contribu- CalBrokerMag.com -

Chimienti & Associates Insurance Services provides a variety of services designed to assist employers in understanding the changing ACA rules and developing compliance strategies. Learn more at www.chimienti.net. Call 559-7331670 or 877-733-1670. JULY 2016

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COBRA

Complexity of COBRA Holds True for Three Decades

by Lisa A. Turner

he year was 1988. I was interviewing for my first big job as a benefit specialist for a Fortune 200 company. I sat across from the hard-nosed labor relations director as he grilled me about my education and experience. In his dealings with contract negotiations, he had grown comfortable catching people off guard, so he barked out, “What do you know about COBRA?” I thought I knew everything there was to know about COBRA after working for a year as a benefit administrator for a small firm. Remember, COBRA guidance was only finalized the prior year, even though President Reagan signed it into law in 1985. Really, how hard could this reply be? In a manner much more confident than I actually felt, I described what the acronym stood for, and what the law was about: continuation coverage, time frames, notices – you get the picture. Today, my answer would not be so confident even though I have dealt with this law for all these years. My mind would be reeling with how much I need to know in my role as a benefit specialist and how much I still learn every day about this multilayered law. The idea for continued health coverage, which later became known as COBRA, was born from a concern to provide continued coverage for women who lost their health insurance through the death of a spouse or divorce. The Older Women’s League (OWL) in Oakland, Calif. and St. Louis, Mo. petitioned their Representatives, Pete Stark and Bill Clay, to sponsor the bill that became law under the massive Consolidated Omnibus Budget Reconciliation Act. COBRA made it possible for

18 | CALIFORNIA BROKER

employees, separated from their employment, to maintain group coverage for themselves and dependents for an extended period, at their cost. At a recent anniversary of its inception, former Dept. of Labor Secretary Hilda Solis noted that COBRA had helped 50 million workers. While employers must offer this continued coverage as a stop-gap for former employees, this positive and compassionate law can actually damage a company and bring financial penalties if handled incorrectly. The employer will assume financial responsibility for errors or omissions whether a company self-administers or outsources COBRA. What’s worse? Those errors may not be covered through business liability insurance. The complicated nature

- CalBrokerMag.com -

of maintaining compliance has not diminished as COBRA enters its fourth decade. Many employers have turned to professional or legal advice to understand and implement the changes in the laws or see how subsequent laws that work in tandem with COBRA should be applied. To avoid clerical and administrative errors, a benefit specialist must thoroughly understand an alphabet soup including HIPAA, CHIPRA, HCTC, and USERRA. What has

JULY 2016

COBRA been written about these laws can fill a library. This list is not exhaustive, and does not include the iterations that appeared during the The American Recovery and Reinvestment Act of 2009 (ARRA) era. How can a typical small business handle the deadlines and keep up with the changes to the law? Many companies outsource this task to a third-party administrator that works exclusively with COBRA. The typical small business may not have the budget for a legal retainer, but may be able to manage an annual or monthly TPA charge to steer clear of excise taxes or ERISA penalties. Keep in mind that substantial penalties can be brought on simply by failing to send an election notice in a timely manner. An ERISA penalty for nongovernmental plans of $110 a day can be assessed against the plan administrator. The ERISA plan administrator is the entity designated by the terms of the plan. An excise tax of $200 a

day applies to COBRA failures under Code Section 4980B(f). Other monetary damages may occur as well. An employer in Alabama got hit with an $83,000 penalty including legal fees.

"It is vital to stay current and diligent with your COBRA processes and procedures or work with a qualified TPA will keep your organization fiscally healthy and risk averse. " ERISA attorney, Robert Lee says that employers can’t be too diligent since the potential cost of a single compliance failure is so great. With so much at stake it’s prudent to allow an expert to handle this very complicated law from tracking the ev-

eryday changes to model language, monitoring election time frames, coordinating coverage with Medicare, and reviewing Social Security determinations to the more involved issues surrounding a bankruptcy or merger and acquisition. In 2016, as I research the latest COBRA and ERISA pronouncements, I've come to realize that, 28 years later, ignorance is not bliss when it comes to COBRA. It is vital to stay current and diligent with your COBRA processes and procedures or work with a qualified TPA to keep your organization fiscally healthy and risk averse. H Lisa Turner is client relations manager for the P&A Group, a multi-service third party administrator of welfare plans, retirement plans and COBRA administration. Founded in 1975, P&A Group is headquartered in Buffalo, NY, with sales offices in the City of Newport Beach, Calif., Raleigh, N.C., Pittsburgh, Penn., and New York City, N.Y. For more information, visit padmin.com.

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JULY 2016

- CalBrokerMag.com -

CALIFORNIA BROKER | 19

COBRA

Five Common COBRA Mistakes to Avoid by Dan Taylor

lthough the 30th anniversary of COBRA being signed into law is upon us, it is still one of the most confusing requirements for employers throughout the country. Compliance with COBRA regulations isn’t easy, but the penalties for making mistakes are very stiff. When it comes to COBRA, even an accidental error can result in ERISA statutory fines, IRS excise taxes, legal fees, and more. For small companies, making a mistake with one employee could lead to serious financial distress or even bankruptcy. Prevent this problem from hitting your organization by avoiding these common mistakes.

NOT UNDERSTANDING WHO IS ELIGIBLE FOR COBRA If a covered employee or family member has a qualifying event, the company must send out a notice informing them of the right to elect 20 | CALIFORNIA BROKER- CalBrokerMag.com -

COBRA benefits. The Qualifying Event Election notice is then sent, which provides detailed information about the COBRA offering and how to sign up, along with deadlines and requirements. A qualified beneficiary is someone who is enrolled on the company health plan and loses that coverage due to a qualifying event. If an employee experiences a qualifying event, but is not enrolled on the company health plan, the organization is not required to offer COBRA. Certain events qualify specific participants while others do not. For example, a divorce or legal separation of a covered employee qualifies the spouse and/ or any dependents losing coverage for COBRA, but the covered employee would remain on the plan as normal. JULY 2016

COBRA

NOT SENDING APPROPRIATE NOTICES There are a number of notices that must be mailed to participants under the COBRA law. These notices help keep participants informed of requirements, dates, benefits, and deadlines. Because many COBRA participants are no longer employed with the organization, mailed notices are often the only forms of communication between the company and the former employee and/or qualified dependents. When these notices are mailed, it is also important to maintain documentation using United States Postal Service (USPS) Certificate of Mailing, since this could be needed during a legal proceeding. Other notices that are required under COBRA include: • General notice • Notice of unavailability • Qualified event election notice • Extension notice (recommended by DOL) • Notice of open enrollment rights (ERISA required) • Notice of plan change (ERISA required) • Notice of early termination • Conversion notice • Notice of insignificant premium underpayment (if applicable)

THINKING THAT YOUR ORGANIZATION IS EXEMPT FROM COBRA LAWS Unless your company has fewer than 20 employees, is a church plan, or is the federal government, you are not exempt from offering COBRA to employees and dependents that experience qualifying events. However, even the 20-employee quota isn’t as cut and dry as it may sound. The law states that employers who have 20 or more employees on at least half of its business days during the previous calendar year must comply with COBRA. All employees, including part-time and seasonal

JULY 2016

employees, count toward the number of employees; calculate how each employee fits into the equation by dividing the number of hours worked by the number of hours required to be classified as full-time.

• Health Reimbursement Arrangement (HRA) • On-site health care • Wellness plan • Employee assistance plan • Alcohol and/or drug treatment program

"Your clients will be turning to you with questions about COBRA that they can’t answer themselves. The rules are complex, and with penalties that can send shock waves throughout an organization, they shouldn’t be ignored. Advise your clients carefully when it comes to COBRA."

CANCELING COBRA DUE TO CANCELLATION OF A HEALTH PLAN If your organization decides to change health plans for employee participation, be sure you understand what this means for any COBRA qualified beneficiaries on the previous plan. Qualified beneficiaries have specific rights under COBRA. For example, they must be treated the same as similarly situated active employees. So, if your active employees are offered a new or different plan, you must offer the same benefits to a COBRA qualified beneficiary. Changing carriers or plans does not take away the employer’s responsibility to allow a qualified beneficiary to stay on the employer’s group health plan. As a broker, your clients will be turning to you with questions about COBRA that they can’t answer themselves. The rules are complex, and with penalties that can send shock waves throughout an organization, they shouldn’t be ignored. Advise your clients carefully when it comes to C OBRA. H

ONLY OFFERING MEDICAL COVERAGE While medical coverage is typically one of the first benefits that people think of when discussing COBRA, it is certainly not the only offering that your organization is required to provide. In addition to continuation on the medical plan, qualified participants may be offered any of these benefits provided by the company in which they were enrolled at the time of the qualifying event: • Dental plan • Vision plan • Prescription drug plan • Flexible Spending Account (FSA) (under certain circumstances)

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Dan Taylor is VP of Relationship Management for Infinisource. For more information, call 800-3003838 or email solutions@infinisource.com.

CALIFORNIA BROKER | 21

MEDICARE

HOW TO GAIN A COMPETITIVE EDGE IN THE

Medicare Market Place

he Medicare sales industry is highly competitive, highly regulated, and highly challenging. It’s not easy to build a solid, profitable customer base when there are so many agents out there. Why should the senior market choose you over the competition? If you’re not sure, see these five ways to gain a competitive advantage as a Medicare sales broker. PLACEMENT Aligning yourself with the right agency is critical for an independent agent’s career. Numerous agencies claim to do a lot for the broker, but not many follow through. Look for a full-service fieldmarketing organization that offers more than just a location to submit business. Make that sure you own that business and are being paid the highest allowable by CMS for it. The more contracts and products that a field-marketing organization offers, the better it is since a complete product offering is valuable to your prospective clients. Look for an agency that has departments that specialize in serving you. From contracting to business development, an ideal marketing organization provides opportunities for you to grow your business. A primary advantage of partnering with a field-marketing organization is the educational support. The better the fieldmarketing organization is, the greater variety of training and higher quality support and tools you’ll get. Also, make sure the organization you choose has an outstanding compliance department that has your back. KNOWLEDGE You have to know your products and services inside and out. An uneducated Medicare broker is useless to the consumer. In the ever-changing Medicare world, stay up to date with Medicare rules and regulations, as well as the an22 | CALIFORNIA BROKER

by Seth Paul

nual health plan benefit changes. If you don’t know something, at least know how to find it. Medicare.gov is a very useful tool. You should also be able to get answers from that sales support team at your field-marketing organization (assuming that you chose a good one).

customer service, and the quality of service you provide to every customer. Your marketing organization can deliver consistency with uniform marketing materials, but it’s up to you to be consistent with the rest. From doing direct mail campaigns to visiting your doctor office partners, your ongoing efforts will set you apart from the competition. A single community event or one visit to a physician’s office might produce some business for you, but it’s your continued participation and effort that will build credibility. Establishing yourself as a credible resource in the Medicare market will absolutely give you an advantage over the competition.

POSITIONING VERSUS PROSPECTING Prospecting clients is a never-ending cycle. And compliance is a must in the extremely regulated Medicare space. Because of these prospecting challenges, the best approach is to position yourself as a leading authority in the Medicare world. When you’re perceived as the expert, you won’t have to chase clients down; they will approach you. Look for opportunities to showcase your knowledge and value as the local Medicare expert. Put yourself where the Medicare consumer already is instead of trying to make them come to you. Whether it’s a doctor’s office, hospital, medical clinic, community event booth, or senior center, make yourself available to be the educational resource that the Medicare community needs. This proper positioning of your business will give you the advantage over a broker who is chasing down prospects and leads.

CREATE ADVOCATES The best business practices revolve around what you promise your customer, and how often you follow through on those promises, so that you don’t just satisfy your customer’s wants and needs – exceed them. You create advocates for your brand when you exceed customer expectations. The goal is to create a pool of fans and advocates who go out of their way to promote what you do. A satisfied client will get you referral business by endorsing you, not because you asked them to, but because they want to. This business is all about creating fans, whether it’s your Medicare clients promoting you and referring friends and family or physicians referring other physicians to use your services. To gain a competitive advantage, and thrive as a Medicare sales broker, partner with the right field-marketing organization, contribute valuable knowledge to the Medicare population, position yourself as an expert, and consistently provide unparalleled service. H

CONSISTENCY Consistency is the key to success. Be consistent in everything you do. This includes the look of your marketing materials, your message, the level of - CalBrokerMag.com -

Seth Paul is Regional Sales manager for AGA Inc. For more information, call 800-699-8294. JULY 2016

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DENTAL

Toothy Toons Our Annual Dental Survey

AN ANIMATED LOOK AT HOW TO FIND THE FITTEST DENTAL PLANS FOR YOUR CLIENTS!

OUR ANNUAL SURVEY 1. What types of plans do you offer? Ameritas: Ameritas has the following types of dental plans available nationwide: PPO, indemnity, voluntary, non-voluntary, groups from two lives and up, individual, consumer driven and cost containment plans. BEN-E-LECT: BEN-E-LECT offers fully insured PPO, EPO, pre-paid and self-insured dental plans for the group market. Employer-paid and voluntary plans with multiple network and out-of-network options down to the employee level are available to groups with as few as two lives. BEST Life: In California, we offer employer-sponsored PPO, and indemnity dental plans to groups with two or more employees enrolling. Voluntary PPO/indemnity dental plans are available to groups with five or more employees enrolling. Custom dental plans can be offered for groups with 100 or more employees enrolling. We also offer group vision and term life coverage. Cigna: We offer a full spectrum of dental solutions, including the Cigna Dental CareÂŽ (DHMO) plan, Cigna DPPO plan, Cigna Traditional indemnity plan, and Cigna Dental Shared Administration. We also offer additional product

24 | CALIFORNIA BROKER

features that enhance our plans. Individual, small group and large group plans are available on a stand-alone basis. Cigna Dental Plans are also available alongside medical and/or vision plans. In California, Cigna DHMO plans are insured by Cigna Dental Health of California, Inc. Cigna DPPO and Traditional indemnity plans are insured or administered by Cigna Health and Life Insurance Company, with DPPO network management services provided by Cigna Dental Health, Inc. and certain of its subsidiaries. All dental insurance policies and dental benefit plans contain exclusions and limitations. All Cigna products and services are provided exclusively by or through operating subsidiaries of Cigna Corporation. Delta Dental: Managed fee-for-service, PPO, and DHMO group dental plans; individual DHMO dental plans and group HMO vision plans. We also offer ACA-compliant small group and individual dental benefits in 43 state and federally administered exchanges. In 2016 we are covering nearly 300,000 lives in these exchanges as a stand-alone dental plan, and just over 500,000 enrollees as the dental partner for about 15 health plans around the country.

- CalBrokerMag.com -

JULY 2016

DENTAL This required us to design pediatric and family dental plans based on different sets of rules for the federal and state exchanges, for stand-alone versus bundled scenarios, and for differing market conditions. Dental Health Services: Dental Health Services offers high-quality, affordable prepaid (DHMO) dental benefit solutions for large & small employer groups and individuals. Other plans are also available, including PPO, EPO, indemnity (reimbursement) products for groups of all sizes, and ASO services for self-funded groups. Guardian: Guardian offers an array of plan options to meet the needs of employers and their employees. Dental PPO, Prepaid/DHMO, and Indemnity plans are available on a voluntary or employer-sponsored basis. Dual and Triple Choice, Monthly Switch (between a DHMO and PPO), and Administrative Services Only plans are also available. Guardian specializes in customized plans based on the needs and price points of the employers and employees. We also offer dental plans for individuals/families, both on and off Covered California, the state’s insurance exchange. Consumers can purchase Guardian’s dental plans directly from www.mydental.guardianlife.com Humana: In California, Humana offers PPO, prepaid/DHMO, traditional preferred, and preventive plus plans. These plans are available on a voluntary or employer-sponsored basis. Principal Financial Group: We offer both employer paid and voluntary plans, including PPO, EPO and POS. We also offer a choice between our plans and dental HMO plans through marketing alliances.

2. How do plans you offer for the individual and/or small group compare in rates and benefits to the large-group plans? Ameritas: Ameritas’ small group and one-life group plans are rated by industry and are pooled in full or in part. Large groups’ experience is rated and includes lower rates in most cases. Ameritas offers a wide variety of plan designs, regardless of group size, to meet customer needs. Non-group individual plan pricing is higher than group individual pricing due to the nature of the risk. BEN-E-LECT: The majority of BEN-E-LECT’s plans compete very well in the large group market. The benefit design and structure of these plans remain consistent across the small and large group markets. BEST Life: Rates vary by plan design, group size and employer contribution. However, we offer a lot of plan design flexibility for groups with 10 or more enrolling. Waiting periods for major and ortho services are waived for groups with 10 or more employees enrolling. Some benefits are standard regardless of size. We offer a separate accident benefit on all of our dental plans which provides up to $1,000 for accidents to sound and natural teeth. There is no maximum on number of occurrences and the amount is not counted toward the calendar year maximum. A child vision benefit is also standard on plans with orthodontic coverage. JULY 2016

Cigna: Dental plan designs and rates for small groups are similar to those of large groups. There are a series of standard DHMO plan designs and DPPO/indemnity plan designs. Cigna offers individual plans in the state of California, available stand-alone or as a buy-up option to our medical plan offering. The plans are DPPO and very similar to our group plans aimed at businesses trying to control costs while offering a large network. Larger groups generally want more robust and flexible plans, while smaller groups and individual plans include more standard offerings. We can custom-fit DPPO plans to offer a variety of cost-savings options for employers, such as missing tooth limitations, class shifting, and varying deductibles, coinsurance, waiting periods, and annual benefit maximums. Our DHMO plans start with basic coverage, specialty discount, split copays, and other cost savings mechanisms and go up to very rich, lower copay plans at the higher end of the cost spectrum, including plans with coverage for surgical implants and related procedures. Cigna can also deliver solutions for the smaller employer segment through the Cigna Voluntary limited benefit dental plan. Delta Dental: While benefits offered to smaller groups are comparable to those offered to larger groups, larger groups have more options in terms of plan designs. Rates can be slightly higher for smaller clients and individuals, but Delta Dental strives to be competitive while balancing our financial risk. With individual DHMO plan benefits, we offer three different plan options — two for individuals and families and one customized for seniors. The individual and family plans offer a wide range of covered services. The senior plan is designed to offer services most utilized by this particular population. Dental Health Services: Dental Health Services works with its group clients on customizing dental benefit solutions that meet their needs. All individual plans offer the same high-quality benefits and services at competitive rates. Guardian: Guardian offers nearly the same plan options to small group employers as to large employers, plus an array of cost-reducing options. We also offer dental benefits through the California state exchange (through Premier Access) and through our direct-to-consumer website www. mydental.guardianlife.com. Humana: We offer flexible plan designs with a range of deductibles, co-payments, and out-of-pocket expense limits to meet the needs of small to large groups. We also offer large groups the additional flexibility to customize plan options. All our dental plans provide employees with incentives for preventive dental care, which promotes their overall health. Customers who see dentists participating in our dental PPO network receive deep discounts. Humana does not offer individual dental plans in California. Principal Financial Group: The only significant rating difference between our small and large group rates pertains to experience rating which is used on groups with 200+ employees. The benefits offered are the same for small and large groups. We do not offer individual dental plans.

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CALIFORNIA BROKER | 25

DENTAL 3. What have been the most recent changes in your plan(s)? Ameritas: With Ameritas Rewards, employers can offer a dental plan and add benefits like vision, LASIK, orthodontia and hearing for more comprehensive coverage. By visiting the dentist and keeping paid benefits under a specified amount each year, employees can earn rewards to carry over to the following year. After the dental benefit maximum is used, rewards can be applied to dental. And specified portions of rewards can be applied to other types of coverage once their maximums are met. BEN-E-LECT: BEN-E-LECT has evaluated its Freedom PPO benefits portfolio and narrowed it down to four plans that have proven to be most beneficial to its members. By focusing on development of those four plans, BEN-E-LECT is now more able to create sustainable rates for its groups taking into account size and location. BEN-E-LECT has also eliminated the waiting period for groups and new hires on its employer-paid plans for added convenience. We have also added an EPO option to our portfolio which allows for even more cost savings and offers one of the strongest networks available. BEST Life: We’ve increased broker service fees throughout California and have numerous promotions and incentives throughout the year, including a 2 year rate guarantee. Our plans are customizable to meet the needs of any group and we have some of the largest regional and national networks available. Our dental plans cover implants and also include a separate dental accident benefit that covers up to $1,000 for accidents to sound and natural teeth that is not counted toward the calendar year maximum. Cigna: We developed the Cigna Dental Oral Health Integration Program® years ago to reinforce the importance of good oral health in relation to overall health. We continue to stress the importance of associations between oral health and certain medical conditions and enhance the program to reflect the latest medical and dental research. Currently the program includes the following list of clinical conditions: cardiovascular disease, cerebrovascular (stroke), maternity, diabetes, chronic kidney disease, head and neck cancer radiation, and organ transplants. The program also provides 100 percent reimbursement of copays and coinsurance on certain dental procedures associated with treating gum disease. We continue to enhance the customer experience with this program. Previously, customers submitted a reimbursement form each time an eligible service was performed. Now, customers can register once (for each eligible condition) and their coinsurance/copays for qualifying procedures will automatically be reimbursed within 2-3 weeks from when we receive the claim from their dentist (for DPPO plans, reimbursements apply to and are subject to the plan annual benefit maximum). We have also made several enhancements to our DPPO products to provide additional benefit flexibility including cost saving capabilities with our dental code classification process thru improved class shifting functionality. Delta Dental: Delta Dental enrollees benefit from cost es26 | CALIFORNIA BROKER

timating tools now available to them: • Fee Finder – With Delta Dental’s Fee Finder tool, PPO and Premier enrollees can access the average fees for 35 commonly used procedures by entering their ZIP codes and a procedure by either entering a procedure code or by selecting a procedure using a drop-down list. The Fee Finder tool provides the average submitted fee for all dentists in the specified ZIP code. • Cost Estimator — Developed by the Delta Dental Plans Association (DDPA), Delta Dental offers a Cost Estimator feature available for our enrollees via the deltadental.com web portal and the Delta Dental Apple iOS and Android App. This tool uses a 3-digit ZIP code, NPF fee data, and the enrollee’s plan design to provide an estimated cost. The tool also allows the enrollee to select a specific provider to see actual dentist fees. Dental Health Services: Dental Health Services now offers dental implants as a covered benefit. Specialized crowns and upgrades are also now available. The company also covers all the most recent ADA Code changes to keep the plans current to offer extensive coverage on each of its plans. Guardian: Guardian constantly develops new, innovative ideas in order to meet our customers’ needs by helping keep their teeth healthy and saving them money. Guardian recently introduced the College Tuition Benefit®, a valueadded benefit that helps Guardian dental members pay for college. Employees covered by a Guardian dental plan that includes the College Tuition Benefit® earn Tuition Rewards® that can be used to pay up to one year’s tuition at one of over 340 private colleges and universities across the nation. Guardian is the only dental carrier to offer the College Tuition Benefit®. In addition, this year we are introducing enhanced PPO plan designs that offer employers and employees more flexibility and control over savings. Humana: Humana is the only dental PPO plan in the market to offer a plan with an unlimited annual maximum. For the first time, employers can provide a true dental insurance plan for their employees. Plans in our new generation of products are available as voluntary plans, and to groups with as few as two employees. All our plans offer an extended maximum benefit where members receive 30 percent coinsurance on services rendered after they reach their annual maximum (implants and orthodontia excluded). It’s important to note that because benefits never reach a maximum, network providers must continue to honor the network discounts, which are among the deepest in the market. This results in members paying as little as 30 percent of retail, depending upon the area of the state where they reside. In addition, we offer open enrollment assistance, orthodontia benefits, and no waiting periods for major services for voluntary groups with 10 or more enrolled. Additional deductible choices, implant coverage, and acrylic filling coverage are also offered. Due to the connection between oral health and overall health, we have added (at no additional cost) oral cancer screenings to all of our products, excluding DHMO/prepaid plans, as well as four periodontal cleanings per year in addition to the two regular cleanings.

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JULY 2016

DENTAL

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DENTAL Principal Financial Group: Our current plan offers significant flexibility in plan design, optional coverage for cosmetic services, TMJ treatment, dental implant coverage, accident coverage, employee choice options and multiple price points. Employers can design any combination of plan options to meet their needs. In addition to our Maximum Accumulation feature which allows members to carry over a portion of their unused annual maximum for use in future years, we also have a Preventive Passport feature.

4. Can an insured use their own dentist even if they are not on your participation list? Ameritas: Members can use any provider, but they may incur additional out-of-pocket expenses when visiting a provider not in the Ameritas network. BEN-E-LECT: Yes, BEN-E-LECT’s plans offer in and out-ofnetwork coverage with multiple options for coverage and benefits. The members maintain complete control over the dentist they choose to utilize. BEST Life: Yes, group and individual products allow members to visit any dentist of their choice and receive coverage for services. Cigna: Insureds can use their own dentist in the DPPO and dental indemnity plans. However, in California there are no out-of-network benefits with DHMO (except for emergency coverage). Individuals can nominate their dentist to join our plan and if the dentist wants to participate and meets our criteria, he/she will be credentialed and added to the network. We are continuously expanding our network to meet the needs of our members, and current and potential clients.

low members to receive treatment from any dentist. Guardian: Members covered under our PPO plans can visit any dentist; however, benefits may be paid at a lower coinsurance rate for non-participating dentists. DHMO members must choose a participating primary care dentist. Humana: PPO members can visit the dentists of their choice. Out-of-pocket savings are greater when members visit participating network dentists. DHMO members must select a participating dentist. Principal Financial Group: Yes, our members can see any dentist even if the dentist is not on the “participation” list if they are enrolled in either our PPO or POS design. If a member is enrolled in our EPO design, network dentists must be seen for services in order to receive benefits under the plan.

5. How many provider locations do you have? Ameritas: California only – Ameritas/FDH Network: 95,354 California provider access points, (67,384 Ameritas; 27,970 FDH); 20,777 California locations, (13,298 Ameritas; 7,479 FDH) Nationwide – total provider access points = 419,913. BEN-E-LECT: BEN-E-LECT’s dental plans utilize the First Dental Health, Dentemax, and Western Dental networks, which contain thousands of offices statewide. BEST Life: We offer access to regional and national PPO networks — First Dental Health (FDH) and DenteMax. Our California network has over 68,672 access points and an additional 9,593 provider locations throughout the state. Our national network has over 285,000 provider locations, which offers our members network access when they are outside of California.

Delta Dental: Delta Dental Premier enrollees can visit any licensed dentist for care, although there are advantages to visiting one of more than 56,000 dentist locations for Delta Dental Premier dentists in California. Enrollees can go to any dentist, but they are only guaranteed to get in-network benefits and avoid balance billing when visiting a Delta Dental dentist. Delta Dental PPO enrollees also have freedom of choice, but can benefit from the protections associated with selecting one of more than 45,000 dentist locations for Delta Dental PPO dentists in California. PPO enrollees have access to Delta Dental PPO and Premier dentist networks with different levels of savings. DHMO enrollees must use a participating general dentist or approved specialist, except for emergency care. There are more than 5,900 dentist facilities for DeltaCare USA in California.

Cigna: As of May 2016, across all specialties, Cigna has over 140,930 unique DPPO network dentists nationally and over 21,484 in California. For DHMO, Cigna offers access to 22,655 network dentists across the country, with 6,715 DHMO network dentists in California.

Dental Health Services: Members of the Dental Health Services’ prepaid (DHMO) and EPO plans choose their dentist from the company’s exclusive Quality Assured network. Participating dentists on all prepaid (DHMO) plan networks are subjected to credentialing, background checks and a 107-point quality checklist. They are also regularly monitored by the company’s Professional Services staff, and plan benefits are only available at these Quality Assured dentists. The company’s PPO and reimbursement plans al-

Guardian: There are over 325,282 PPO access points across the country and more than 43,704 in California. We are one of the largest PPO networks in the state based on dentists. The DentalGuard Alliance network tier, a smaller group of dentists offering greater discounts, has over 6,970 dentist access points in California. For the DHMO, there are 51,027 dentist access points across the country and 16,335 in California. Guardian’s PPO network also includes dental offices in Mexico. International Assist, a value-added

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Delta Dental: Our networks offer access to more than 56,000 dentist locations for Delta Dental Premier, more than 45,000 dentist locations for Delta Dental PPO and more than 5,900 dentist facilities for DeltaCare USA in California. Dental Health Services: Dental Health Services’ exclusive Quality Assured dental network consists of 950 general practice offices with 4,500 participating dentists and an additional 2,000 specialists.

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JULY 2016

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DENTAL service available, provides dental members with access to dental care if needed while traveling outside of the U.S. In addition, a supplemental listing of out-of-network dentists, Out-of-Network Plus, provides Guardian members greater selection in finding an affordable dentist. Humana: Nationally, Humana has more than 275,000 provider locations. In California, we have approximately 34,000 provider locations. Principal Financial Group: We have approximately 69,500 PPO provider locations and 25,900 EPO provider locations in the state of CA.

6. What percentage of your network is closed to new enrollment? How many offices does this represent?

Principal Financial Group: Less than 5%.

7. What is the time frame for processing a referral in terms of member notification and payment to the specialist? Ameritas: Since this is a self-referring process, this question is not applicable. BEST Life: No referrals are required. Members may selfrefer to any specialist they choose.

Ameritas: PPO: California only – Only 419 Ameritas Offices and 37 FDH Offices are closed to new enrollment. This represents approximately 0.73%. Nationwide – 5,380 offices are closed to new enrollment, which represents approximately 1.45%. BEST Life: All participating PPO dentists are accepting new patients. Cigna: DHMO — We look at data on dentist capacity and current and projected Cigna Dental Care member loads. Network managers regularly monitor capacity and projected growth. They contact dentists as necessary to discuss capacity expansion through staff increases or office hour changes. If these actions are not feasible, we will consider adding more dental offices. Nationwide, as of May 2016, approximately 9 percent of the Cigna Dental Care network dental offices are closed or capped to new members. DPPO Network dentists do not cap or close their offices to new members, and DPPO members are not required to select a primary network dental office. BEN-E-LECT: All of BEN-E-LECT’s dental PPO providers are accepting new patients. For the DHMO product, less than 3% of the offices are closed to new enrollment representing approximately 60 offices. Delta Dental: 0%. Under the PPO/Premier plans, enrollees are free to see any licensed dentist. Contracted dentists can close their practices to new patients but cannot close their practice exclusively to new Delta Dental patients; 3.64% DHMO dental facilities are closed to new enrollment. Dental Health Services: Although roughly five percent of participating dentists have been lost over the past 12 months, our overall network size has increased by five percent over the previous year. By focusing on seeking out only the most qualified dentists, the company improves accessibility and availability for members. The names and phone numbers of all offices are available upon request. Guardian: In California, only 0.03% of our PPO network and 3.2% of our DHMO network is closed to new patients. Humana: Under Humana’s provider contract, participat30 | CALIFORNIA BROKER

ing dentists must schedule and treat members without discrimination, including benefit or payer differentials. Because this is a fee-for-service reimbursement program, closed practices are not common.

BEN-E-LECT: A referral is not necessary. Members may call and schedule the appointment as desired. Cigna: DHMO Network general dentists initiate patient referrals for endodontic, oral surgery, and periodontal treatment. Referrals are confirmed for 90 days from the approval date. Specialty referrals are not required for orthodontic treatment or pediatric care for children up to seven years old, as long as members visit network specialists. The network dentist may submit a request for preauthorization to Cigna for oral surgery, endodontic and periodontal services. Members are responsible for the applicable patient charges listed on the patient charge schedule (PCS) for covered procedures. After specialty treatment is finished, the member should return to the network general dentist for care. If a network specialist is not available, the general dentist will refer the member to an out-of-network specialist, and the member will be responsible for charges listed on the PCS; however, Cigna Dental Care (DHMO) network general dentists render the range of services that are required for graduation from dental school, including diagnostic treatment, preventive treatment, operative dentistry, crown and bridge, partial and complete dentures, root canal therapy, minor oral surgery, preliminary periodontal therapy, and pediatric dentistry. DPPO There is no need for a referral by a primary care dentist to obtain services from a specialist with the Cigna DPPO plan. Members may choose to seek service from any in- or out-of-network specialist or general dentist in the U.S. Of course, network dentists have agreed to our reduced fee schedules, which helps lower our members’ out-of-pocket expenses. Indemnity Cigna Traditional indemnity members can seek care from any licensed dentist in the U.S. Delta Dental: For PPO and Premier patients, specialty care referrals are not required, and payments to specialists are processed the same as for general dentists. For DHMO enrollees, preauthorizations for specialty care processed within five business days.

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JULY 2016

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DENTAL Dental Health Services: Emergency referrals are processed immediately. In a non-emergency situation, referrals are processed within one to two weeks. Claims are paid within three weeks. Guardian: Referrals are not required under our PPO plans. For our DHMO plans, payment to the specialist is within 30 days of receipt of the claim. Humana: Humana’s dental plans do not require a referral from a general dentist to a specialist. The member gets a higher benefit when seeing a participating dentist and specialist. In 2015, 98% of claims were processed within 14 calendar days. Principal Financial Group: Not applicable to our plans.

8. How do you handle early termination of coverage when a member is still in the middle of orthodontic treatment? Ameritas PPO: PPO provider discounts are determined using the treatment start date. Ameritas PPO providers are contractually obligated to honor those discounts for any ongoing covered treatment under their plan. BEST Life: Coverage terminates at the end of the month in which a member is no longer eligible. BEN-E-LECT: Payment for benefits will cease at the end of the month for which the termination became effective. Cigna: Coverage for orthodontic treatment which was started before disenrollment from the dental plan will be extended to for 60 days after disenrollment, unless it was due to nonpayment of premiums. Delta Dental: Delta Dental’s obligation to pay toward orthodontic treatment terminates following the date the enrollee loses eligibility or upon termination of the client’s contract. Guardian: When an orthodontic appliance is inserted prior to the PPO member’s effective date, we will cover a portion of treatment. Based on the original treatment plan, we determine the portion of charges incurred by the member prior to being covered by our plan and deduct them from the total charges. Our payment is based on the remaining charges. We limit what we consider of the proposed treatment plan to the shorter of the proposed length of treatment, or two years from the date the orthodontic treatment started. Also, we enforce the plan’s orthodontic benefit maximum by reducing the total benefit that Guardian would pay by the amount paid by the prior carrier, if applicable. If a member is undergoing orthodontic treatment and his or her Guardian coverage terminates, we pro-rate the benefit to cover only the time period during which coverage was in force. We do not extend benefits. Our DHMO agreement provides for the Contracted Orthodontist to complete treatment at the contracted patient charge on a number of our plans. As an additional contract rider we can allow for supplemental transfer coverage for Orthodontia under our DHMO. 32 | CALIFORNIA BROKER

Humana: Humana will prorate to provide the appropriate amount given during the time the member was in the plan. Principal Financial Group: On individual terminations, most of our plans allow for extended benefits that provide one month of additional coverage.

9. Does your plan have annual and lifetime maximums on dental coverage? If so, what are they? Ameritas: Ameritas is known for plan flexibility and meeting employer needs rather than offering set plans to choose from. Annual maximums for dental procedures range from $400 to $3,000. Lifetime maximums for orthodontia range from $500 to $2,500. Ameritas will accommodate employer requests on plan maximums. BEN-E-LECT: Each of BEN-E-LECT’s PPO/EPO plans have an annual maximum; PPO/EPO $1,000 = $1,000 maximum; PPO/EPO $1,500 = $1,500 maximum; PPO/EPO $2,000 = $2,000 maximum; PPO/EPO $2,500 = $2,500 maximum. BEN-E-LECT’s Pre-Paid DHMO has no maximums. BEST Life: We offer calendar year maximum options of $500; $1,000; $1,500; $2,000 and $2,500; depending on plan design for dental services. We offer $1,000 lifetime and $500 calendar year maximum for adult orthodontia benefit options. We offer $1,000 lifetime and $500 calendar year maximum or $1,500 lifetime and $750 calendar year maximum for child orthodontia benefit options. Cigna: Cigna DHMO plans do not have any annual or lifetime maximums. Cigna DPPO plans have variable annual and lifetime maximums options. Delta Dental: Annual maximums for our Premier and PPO plans vary and, for group plans, are determined by the group purchaser; lifetime maximums apply only to certain procedures such as orthodontia (if covered by the plan). Under our DeltaCare USA DHMO, there are no annual maximums; lifetime maximum applies to orthodontia. Dental Health Services: On Dental Health Services’ Prepaid (DHMO) plans there is no annual maximum. The company’s PPO/EPO plans feature annual maximums and lifetime orthodontic coverage. Guardian: Annual and lifetime maximums vary by plan. Annual maximums can range from $500-$5,000 for all services combined or can exclude Preventive services. Lifetime maximums on Orthodontia services can range from $500$2,500. The Maximum Rollover benefit allows members to roll over funds for future use if the member visits the dentist each year and uses only a specified portion of the annual maximum benefit. Humana: We offer flexible plan designs with a range of annual maximums to meet the needs of small to large groups. We do not have lifetime maximums. We are the only dental plan in the market to offer an Unlimited Annual Maximum.

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JULY 2016

DENTAL 10. Does your plan have a deductible. If so, what is it? Ameritas: An Ameritas dental plan may or may not have a deductible. Plans are customized to meet employer and employee needs. Deductibles are typically waived on preventive procedures and vary based on procedure type. Ameritas offers calendar year or plan year, lifetime and pervisit deductibles, and also a family maximum deductible to cap the number of family members who must satisfy the deductible. BEN-E-LECT: BEN-E-LECT’s plans have the following deductibles: PPO/EPO $1,000 = $0 Deductible; PPO/EPO $1,500 = $100 Deductible; PPO/EPO $2,000 = $100 Deductible; PPO/EPO $2,500 = $100 Deductible. Pre-Paid DHMO has no deductible. BEST Life: We offer several calendar year deductible options: $0, $25, $50, $75 or $100. There is a 3 per family maximum on the calendar year deductible. Cigna: Cigna DHMO plans do not have any deductibles. Cigna DPPO plans have variable deductible options. Delta Dental: Deductibles for our Premier and PPO plans vary and, for group plans, are determined by the group purchaser. Deductibles do not apply under our DeltaCare USA DHMO plans. Dental Health Services: Dental Health Services Prepaid (DHMO) plans have no deductibles. The company’s PPO/ EPO plans have deductibles. Guardian: Deductibles vary by plan and can range from $0-$300. Humana: We offer flexible plan designs with a range of deductibles to meet the needs of small to large groups. The deductible is always waived for preventive care. We want to ensure there are no barriers to members receiving the necessary preventive care. Principal Financial Group: We have a wide range of deductibles available to fit the employer’s needs.

11. What percentage of preventive costs does your plan cover? Ameritas: Ameritas plans typically cover preventive procedures at 80% or 100% to encourage members to maintain good dental health and avoid costly treatments in the future. Ameritas will also accommodate most other coinsurance requests. BEN-E-LECT: All of BEN-E-LECT’s PPO/EPO and Pre-Paid DHMO plans cover 100% preventative care. BEST Life: Our plans pay 100% for in-network preventive services and Indemnity plans and 100% or 80% for out-ofnetwork preventive services on our PPO plans, depending on the plan design. Cigna: All Cigna DHMO and DPPO individual plans cover preventive care at either no additional cost or for a minimal JULY 2016

cost. Cigna DPPO group plans have variable coinsurance options for Class I services, typically set by the employer. Cigna also offers group customers Cigna Dental Waiver Saver, where customers’ Class 1 (preventive) services can be waived for maximums and deductibles, providing an incentive for customers to seek preventive care. Delta Dental: Percentages vary according to the plan. Dental Health Services: Dental Health Services values preventive services. Most of the company’s plans feature no cost for preventive services. Guardian: Preventive services are typically covered at 100%, but this varies by plan and can range from 0-100%. Humana: Preventive care is always covered at 100 percent, unless a large group designs a custom plan. We encourage all employers to cover preventive care at 100 percent. We want to ensure there are no barriers to members receiving the necessary preventive care. Principal Financial Group: We have a range of preventive care coinsurance options available to best fit the employer’s needs.

12. What percentage of root canal costs does your plan cover? Ameritas: A root canal is generally covered as a Type 2 (Basic) procedure, but can be moved to Type 3 (Major) at the employer’s request. The plan benefit (percentage of the procedure that’s covered by Ameritas) varies based on procedure type. Ameritas sets the plan benefit for each procedure type based on employer request. But the most common plan benefits for Type 2 and Type 3 are 80% and 50% respectively. With an Ameritas incentive plan, a root canal covered under Type 2 could be covered at 100% during the employee’s third year on the plan. BEN-E-LECT: All of BEN-E-LECT’s PPO/EPO plans cover root canals at 50%, Pre-Paid DHMO is covered by a co-pay. BEST Life: Our plans offer the option to cover endodontics with periodontics in either basic or major services. If endodontics are covered as a basic service: • Indemnity High: 90% • Indemnity Mid: 80% • Indemnity Value: 50% • PPO High: 90% in-network / 80% out-of-network • PPO Mid: 80% in-network / 50-80% out-of-network, depending on plan design. • PPO Value: 50% in-network / 20% out-of-network. If endodontics are covered as a major service. • Indemnity High: 60% • Indemnity Mid: 50% or not covered, depending on plan design. • Indemnity Value: not covered • PPO High: 60% in-network / 50% out-of-network • PPO Mid: 50% in-network / 50% out-of-network or not covered, depending on plan design. • PPO Value: not covered.

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CALIFORNIA BROKER | 33

DENTAL Cigna: For Cigna DHMO plans this varies by the plan type selected. Cigna DPPO plans have variable coinsurance options for endodontic services. Delta Dental: Percentages vary according to the plan. Dental Health Services: Dental Health Services offers many variations to plan designs and varies the cost sharing for members on procedures. The company offers plans with very low cost sharing on root canals. Guardian: Preventive services are typically covered at 100%, but this varies by plan and can range from 0-100%. Humana: We offer flexible plan designs with a range of co-insurance percentages to meet the needs of small to large groups. A group can elect to have endodontic coverage in Basic or Major. Principal Financial Group: We have a range of coinsurance options for root canals available to best fit the employer’s needs.

13. What percentage of crown costs does your plan cover? Ameritas: Ameritas plans usually cover a crown as a Type 3 (Major) procedure. The plan benefit for Type 3 procedures varies from 40% to 60%, or employer request. BEN-E-LECT: BEN-E-LECT provides benefit plans including dentist’s costs for all PPO/EPO and DHMO plans, as well as copay amounts, if necessary. More information regarding plan details is provided on our website at w ww. benelect.com/dental BEST Life: Crowns are covered as a major service: Indemnity High: 60% Indemnity Mid: 50% or not covered, depending on plan design. Cigna: For Cigna DHMO plans this varies by the plan type selected. Cigna DPPO plans have variable coinsurance options for prosthodontic services. Indemnity Value: not covered PPO High: 60% in-network / 50% out-of-network PPO Mid: 50% in-network / 50% out-of-network or not covered, depending on plan design. PPO Value: not covered. Delta Dental: Percentages vary according to the plan. Dental Health Services: Dental Health Services offers many variations to plan designs and varies the cost sharing for members on procedures. The company offers plans with very low cost sharing on crowns. Guardian: This varies by plan and can range from 0-100%. Humana: We offer flexible plan designs with a range of co-insurance percentages to meet the needs of small to large groups. Fillings are typically covered as part of Basic services.

34 | CALIFORNIA BROKER

Principal Financial Group: We have a range of coinsurance options for crowns available to best fit the employer’s needs.

14. Do you provide dentist cost and quality transparency tools? Ameritas: Ameritas provides an online dental cost estimator tool members can use to access cost estimates for out-of-network dentists by area. Ameritas also provides an online directory of network dentists along with contracted dentist fees by area. All network dentists must complete a strict credentialing process and office evaluation to be included in the network directory. Members can contact Ameritas Customer Connections for assistance MondayThursday, 7:00 a.m. to midnight CST and 7:00 a.m. to 6:30 p.m. CST on Friday. BEST Life: We offer predetermination to members that provide them with an estimate of how their benefits will be processed. Cigna: Cigna makes selecting a dentist and budgeting for dental expenses easier. Most DPPO customers have access to personalized out-of-pocket cost estimates by service and by dental office as well as detailed profiles about each dentist, often including photos and videos. The tools are available on myCigna.com, Cigna’s personalized customer website, and the myCigna mobile app. Delta Dental: Yes. A variety of tools are available to Delta Dental enrollees. On our website at deltadentalins.com, we offer a fee finder tool, which shows enrollees the average submitted fees of Delta Dental contracted dentists, and, for specific clients, we have a cost estimator tool that can estimate an enrollee’s approximate fee based on their eligibility, benefits, dentist and location information. At deltadental.com or via an app for Android and iOs, enrollees can access a cost estimator tool, which shows estimated costs as well as actual fees charged by a specific dentist(s). Dental Health Services: Dental Health Services Prepaid (DHMO) plans offer a flat member copayment for all procedures. Regardless of what a dentist may charge in their practice, plan members only pay the set dollar amount listed in their schedule of covered benefits. Guardian: Guardian’s web site, Guardian Anytime (www. guardiananytime.com), includes a dental cost estimator tool for greater cost transparency. The tools allows members to better plan for care and see the cost difference between in- and out-of-network care. Humana: At this time, Humana’s website does not provide cost information for our dental products. Principal Financial Group: We provide an online resource that members can use to access a variety of oral health information including a procedure cost estimator. H

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JULY 2016

ANNUITIES

SELLING THE FLEXIBLE BENEFITS OF A FIXED DEFERRED ANNUITY

t’s an uneasy time for investors. Instability in the stock market has created anxiety for investors who have experienced vulnerability in the value of their investment portfolios. It may be an especially sensitive time for your more conservative clients who want to know that their hard-earned dollars are protected for retirement. A fixed deferred annuity is an attractive option that can help a client make the most of their investment while still supporting various financials goals. Fixed-deferred annuities offer investors tremendous flexibility while providing the peace-of-mind that their principal investment will always be protected.

TARGET CLIENTS FOR FIXED DEFERRED ANNUITIES Fixed deferred annuities are a good fit for these types of investors: • Buyers who want to protect and build their money before it’s transferred to designated beneficiaries. • Conservative investors who value guarantees and don’t want to lose their principal investment. • Middle-of-the-road clients who want to use a fixed annuity for safe dollars in their asset allocation. This can lower the volatility in their portfolio. Typically, a fixed deferred annuity is a good fit for clients with a conservative investment mindset and a more hands-off approach to investing. A client whose funds are truly safe with a fixed deferred annuity has the flexibility to take more risks in other aspects of their investment portfolio. STRONG GUARANTEES Several important attributes of a fixed deferred annuity make it an ideal investment for a client who wants to diversify their investment portfolio with a flexible and sound option. One of the key aspects of a fixed deferred annuity is having strong guarantees. A fixed JULY 2016

by Rich Lane deferred annuity provides minimum spouse or guarantees that offer the peace-of- b e n e f i c i a mind that the client will never earn less ries are prothan the stated minimum. vided for after Additionally, some fixed annuities they pass away. provide a guaranteed return-of-premiYour client can flip um, even during the surrender-charge the switch to convert a fixed deferred period. After the surrender-charge pe- annuity from an accumulation vehiriod, the client is always guaranteed to cle to an income stream at any time. receive the principal, minus any previ- Perhaps your client needs income to ous withdrawals. Most investments or supplement Social Security or another insurance products have flexible with- source of retirement income, such as drawal options for how a client can ac- a 401(k) or pension. This means your cess a portion of the investment with- client has control over when or if they turn on an income stream. out incurring a surrender charge. For investors who need early access to funds, a fixed deferred annuity has PROTECT A NEST EGG For clients who have an investment built-in provisions that allow for access nest egg to protect, a single-premium to money without incurring a surrender fixed deferred annuity serves as a low- charge. A fixed deferred annuity also is a risk investment that is guaranteed to great option for a client to transfer their grow. That’s because it allows for triple assets to beneficiaries since the procompounding to begin immediately ceeds are not taxed until a distribution is upon purchase. An investor can reap made. Many annuities allow the client to the benefits of gaining on the principal select a payment option for their heirs. Whether a client is conservative, amount, interest on the interest, and interest on the money that would oth- financially aggressive, young, or in a post-retirement phase of life, a fixed erwise have been lost to taxes. Creating a nest egg takes time and deferred annuity can help make sure discipline. A flexible premium deferred they meet their financial goals and annuity offers an investor triple com- have a sustainable aspect to their fipounding while allowing for flexible de- nancial portfolio. H posit options — both of which are im portant components to creating a nest Rich Lane is the senior director of individual anegg. Fixed deferred annuities, either nuity sales and marketing for Standard Insurance single or flexible premium, help your cli- Company. He has been in the fixed annuities inents accumulate funds for retirement or dustry for almost 20 years, with an emphasis on product and distribution development for brokerfor wealth transfer in the future. A FLEXIBILITY FILLED FUTURE One of the biggest advantages of investing in a fixed-deferred annuity is the flexibility that it offers the investor. Income options from a fixed deferred annuity are numerous, and can be tailored to a client’s situation. A buyer can choose lifetime income or income for a certain period. Or a buyer can build in survivor income access so their - CalBrokerMag.com -

ages, banks and broker/dealers. Rich was recently elected to the National Association for Fixed Annuities (NAFA) board of directors for 2015. The Standard is a leading provider of financial products and services, including group and individual disability insurance, group life and accidental death and dismemberment insurance, group dental and vision insurance, absence management services, retirement plans products and services, individual annuities, and investment advice. For more information on The Standard, visit www.standard.com. CALIFORNIA BROKER | 35

HEALTHCARE

Building a Successful Telehealth Strategy by Scott Sanford

LOVED THIS YEAR AND RENEWED THE NEXT!

ven when a carrier includes a telehealth plan, there’s still value and opportunity in providing a standalone plan that embraces the other "e" word – “engagement.” It seems like a good idea to have an embedded telehealth plan as part of a comprehensive employee benefit program – as opposed to having a stand-alone program. After all, the more solutions that can be packaged neatly inside a benefit plan the better – right? Many employers are finding that the answer is not so crystal clear. The problem is that many employees don’t know what benefits they have, don’t understand their benefits, or forget to use them. So embedding re36 | CALIFORNIA BROKER

"When you consider how utilization of a telehealth plan can reduce health care costs, it’s clear that the focus must shift to employee engagement." ally means hiding, and hiding means not using. A study by ADP reveals that 40% of employees don't understand their benefits. Also, nearly 85% of HR professionals say employees don't understand how healthcare costs are affected by - CalBrokerMag.com -

their use of benefits and their behaviors. Many employers have found that an embedded telehealth benefit only works when there is a concerted effort to market it. Unfortunately, that usually doesn’t happen from the employer or from the telehealth plan administrator. When you consider how utilization of a telehealth plan can reduce health care costs, it’s clear that the focus must shift to employee engagement. A BROKER’S ROLE IN E MPLOYEE ENGAGEMENT: BREAKING UNHEALTHY HEALTH CARE HABITS Communication is key to affecting your client’s bottom line. For brokers, JULY 2016

HEALTHCARE it means offering benefits with a full suite of marketing and promotional tools to engage employers and em-

The key is to find a plan that has a comprehensive marketing effort behind it – one that is based on relationship building with the employer to help employees use it. ployees. It may be the biggest opportunity that brokers have to show that they can provide value in helping shape employee behavior. Behavior is a tough thing to change. We’ve all heard that habits take 21 days to break. If we get a sore throat on Sunday morning, we are likely to wait until Monday to call a doctor for an appointment, even if we have a telehealth plan – just because it is something that we have always done. If the baby’s fever spikes in the middle of the weekend, we are also likely to forget about our telehealth plan and rush the nearest urgent care center even if though is a costly option. Old habits take charge when panic sets in. A plan that isn’t talked about very much is easily forgotten. THE REAL ISSUE IS THE E WORD Embedded plans often lack a real engagement strategy. Telehealth without engagement is like a beautiful, highperformance sports car without gasoline. It won’t go anywhere without a fullblown promotional strategy to improve utilization. The word “embedded” implies included. Like those departmentstore gift-with-purchase offers, included extras aren’t often not seen as very valuable. That’s doubly true when there are no physical reminders – like a membership card. Since we’ve all been conditioned that our insurance card is the JULY 2016

holy grail when it comes to benefits, the lack of a card is enough for many of us to claim amnesia. The real problem with an embedded plan is that it is often considered a check-box benefit with utilization at typically less than 2%. There may be attempts to inform members by mailing them brochures about telehealth benefits. But, more often than not, employees toss them out as junk mail when there has been no personal attempt at engagement, and when no one has informed them that they have

The key is to find a plan that has a comprehensive marketing effort behind it – one that is based on relationship building with the employer to help employees use it. a telehealth plan in the first place. The key is to find a plan that has a comprehensive marketing effort behind it – one that is based on relationship building with the employer to help - CalBrokerMag.com -

employees use it. That way, you’ll discover a way to help clients make a real dent in health care costs. Even better, find a plan that offers return-oninvestment reporting on information such as the number of visits avoided to primary care physicians, to the ER, and to urgent care centers, as well as claim savings from avoided in-person visits. That way, you’ll see that the full-engagement telehealth plan you recommend will be considered invaluable. Value is what it is all about when enrollment time rolls around next year and the key phrase you want to hear from clients is, “Let’s renew.” H

Scott Sanford is co-founder and chief growth officer at Scottsdale, Arizona-based HealthiestYou, a telehealth and wellness delivery innovator that was named one of the fastest growing companies in America by Inc. Magazine for 2015. HealthiestYou provides immediate access to quality medical care serving over 10,000 employer groups throughout the nation, HealthiestYou reports a consumer satisfaction rating of over 97%, compared with a national average rate of 68% for traditional doctor’s office visits. Last fall the company received a $30 million round of funding and today is on a path of vigorous growth. For more information, call 480779-4360 or visit healthiestyou.com. CALIFORNIA BROKER | 37

HEALTHCARE

The End Of The Affordable Care Act? I

by John Sarich

guess you could say it is the logical end to an illogical program. Chickens really do come home to roost. Health insurers that were either silent on the ACA or went along with it willingly are now looking for the inevitable handout. They to were called “Risk Corridors” that were supposed to pick up the underwriting losses that would be inevitable with the ACA. Keep in mind that there has never been an insurance program run by the government that you could call successful. I can go back to the days of the JUAs— joint underwriting authorities—that were set up by states to handle the uninsurable driver. Then there are the CHIP plans, health insurance plans, again run by states, to handle the problem of uninsured children. In each and every case the actuarial soundness of the program was ignored, and all of these programs circled the drain. When actuarial experience, the absolute quantified numbers, say you need to increase rates, the politicians in charge deny reality and let the program slide—with no rate increases that would be required to keep the program viable. Do that a few times, and the program in question is asking for money from whatever level of government created the mess, and the politicians can’t come up with the money. So, the claim checks start to bounce and no one gives a hoot because the whole program was designed to make politicians feel good. It doesn’t have to be this way. For better or worse, there is a role for government to play in certain areas of insurance. But the government (or 38 | CALIFORNIA BROKER

more accurately, “We the People”) must understand how market distortions occur when government becomes involved in a heretofore private commercial transaction. If there are any lessons to be learned from 40 years of the Medicare program, the major one is that millions of people relying on government for their health care at below-market prices is not sustainable. A few tricky things get in the way—demographics, individual behavior, provider capabilities, and an overall attempt to control the senior health care market. Of course those millions of people dependent on the government for health care represent millions of votes—and those millions of voters want broader insurance coverage at the same cost. Hard-to-insure and uninsurable people will always exist in any insurance market. Whether it is homeowners, automobile, life, health, or disability insurance, there are some people who simply do not qualify. The guy with 6 DUIs in last 3 years isn’t insurable in the standard market where most people fit. But there are insurance companies that will offer insurance to the “uninsurable”—with the caveat that it will be expensive and will not afford high-dollar coverage. If there are enough people with DUIs, they can create enough noise to get a politician to claim they are victims of greedy insurance companies who have raised premiums to unaffordable levels. It doesn’t take long before the politician comes up with a scheme to insure these uninsurable drivers at a lower cost. And as life imitates art, these - CalBrokerMag.com -

folks will get more DUIs and cause more accidents, and politicians will be forced to fund their novel solutions with more and more tax dollars. All of these government insurance programs began the same way—with realistic funding and the potential to accomplish their intended purpose. But once the actuaries say, “We need a rate increase of 20 percent.” The politicians immediately go to work to win budget approval. The reality is that governmental budgets are based on give and take, and this insurance program is just one of dozens of worthy budget items. So they compromise on something less than 20 percent. And so begins the death spiral. Chief among the lessons to be learned from the ACA experiment is that no matter how noble, altruistic, and politically correct a government program can be in addressing some problems, the solution usually lies somewhere other than in another bureaucratic fix whose overriding philosophy is “the end justifies the means.” The history of the ACA, while for now incomplete, will show that top-down, “my way or the highway” approaches lead to animosity, failure, and ultimately back to square one. In point of fact, the number of uninsured—allegedly the problem that was to be solved— has yet to change with the ACA. H John Sarich is an industry analyst and VP of Strategy at VUE Software. He is a senior solutions architect, strategic consultant and business advisor with over 25 years of insurance industry experience. He can be reached at John.Sarich@VUE Software.com. JULY 2016

SELF-FUNDING

Self-Funding Is Here. Are You Ready? by Chris Moyer

he role of a broker isn’t easy. You have to balance the needs and requirements of many business partners while you generate solutions that will deliver quality and affordable health care to your clients. If you don’t offer the right solutions, you risk losing valuable clients. The broker business is extremely dynamic. What we do is important and continued education is essential. The Affordable Care Act continues to create opportunities. More and more groups are asking about self-funding their health plans. From a broker perspective, this could be music to your ears or it could be your worst nightmare. Regardless of where you fall, here are some important points about self-funding that you should know in order to best advise your clients: 1. By self-funding, your client is essentially deciding to be the insurance company and assume fiduciary responsibility. Because the client becomes the fiduciary, the employer takes on the financial risk of funding their health plan from their assets. They become responsible for managing and administering the benefit plan. Self-funded plans are governed by the Employer Retirement Income Security Act (ERISA). They are appealing to employers because of the greater level of flexibility that comes with being able to tailor the plan to their needs with fewer statemandated features. 2. Self-funding generates improved cash flow for clients. They have ability to pay claims as they are incurred rather than paying premiums in advance. It is important to note that there can be ebbs and flows in utilization and therefore claims funding. For that reason, a self-insured solution should be a long-term strategy. However, over the course of several years, almost all JULY 2016

clients that have the risk tolerance to self-fund will save money. 3. Size does not necessarily matter. While the law of large numbers suggests that the bigger the employer, the more likely they are to be a viable candidate for self-funding, that is certainly not always the case. If a large employer does not have enough cash flow to pay claims and wait for reimbursement from stop loss carriers, then self-insuring their plan may not be the best option. Conversely, a smaller employer may have more liquidity and be more risk tolerant making self-insuring a good choice. 4. Self-funding offers significant flexibility in plan design, as well as multiple options for stop-loss protection. Stop-loss protection, or reinsurance, is a separate policy that clients can purchase that provides protection for large claimants. Generally, the more risk the client is willing to take on, the lower the premium the client will pay to the stop-loss carrier. That’s why it’s important for brokers to have a consulting relationship with their clients. Brokers need to know what is most important for their clients in terms of benefit design versus what the cost impact will be to the plan. You should be asking, “Is it more important for you to have lower fixed cost in exchange for taking on more risk, or are you more risk adverse and willing to pay higher premiums?” You should also engage your clients in strategies to control their health care spending. However, client’s who do not have the desire or time to invest in monitoring their plan, engaging their employees, and creating a culture of accountability may lose out on important opportunities to control costs. But this is no different from the insured counterpart. For example, if - CalBrokerMag.com -

you recommend a comprehensive wellness plan to a client who is not engaged in the plan, they are likely to see disappointing results. Having a strong consulting relationship with your clients and understanding their culture is the key to building a longterm winning strategy. 5. Self-insured plans provide a tremendous level of transparency. These plans provide clients with monthly, quarterly, and annual recaps of all costs associated with their plans, including administration, savings from cost management programs, and premium and commission costs. This information enables clients to be able to customize their plans for maximum effectiveness. From a broker perspective, this information gives you valuable insight into plan cost-drivers and offers a platform for you to determine appropriate strategies to help your client achieve their health care goals. Providing this information is critical and will help solidify your relationships with your clients. One last bit of advice: Partner with companies that have a good reputation and want to grow their business in tandem with you. It is in their best interest to assist you in understanding selffunding and help navigate you though the pitfalls to success. Staying abreast of options that your clients may see as valuable to help them reign in the cost of this benefit will put you in a position to grow and retain your business. H Chris Moyer is vice president of HealthNow Administrative Services. HealthNow is a third-party benefits administrator. The company was founded more than 30 years ago as a privately owned and independent company. In 2006, HNAS was acquired by HealthNow New York Inc., a $2.5 billion company based in Buffalo, NY. For more information, call 610-491-4824, email Chris.moyer@hnas.com, or visit HNAS.com. CALIFORNIA BROKER | 39

CRTICIAL ILLNESS

WHY ARE MORE COMPANIES OFFERING

Critical Illness Protection Plans by Gary Harger

ompanies that are looking to reduce health care costs often consider eliminating supplemental, or voluntary, benefits such as vision, dental, disability, accident and critical illness. However, there are compelling reasons why employ40 | CALIFORNIA BROKER

ers should continue to offer or even add these benefits to their offerings in 2016 â&#x20AC;&#x201C; either paid for partly by the employer or as voluntary benefits with premiums paid by employees. Surveys show that voluntary benefits can help attract and retain em- CalBrokerMag.com -

ployees. According to a recent report from LIMRA International, 71% of employers believe that voluntary benefits improve worker morale and satisfaction. Adding supplemental benefits to a core benefit offering can improve companiesâ&#x20AC;&#x2122; bottom lines by increasing JULY 2016

CRTICIAL ILLNESS productivity and employee engagement. Additional tools and information can improve employees’ health, helping companies manage medical costs more effectively. A newer voluntary benefit that many employers are now offering is critical illness protection. These plans add financial certainty for employees – especially those enrolled in high-deductible health plans – by providing a cash benefit to help fund employees’ out-of-pocket expenses after a major illness such as heart attack, stroke or cancer. More than one in four private employers with at least 10 employees offers a critical illness benefit to their non-union workforce, according to a LIMRA study, and this rate has more than doubled since 2002. Major illnesses are expensive. The reality can be devastating for employees facing high deductibles or coinsurance payments and potential lost income. Critical illness protection plans are designed to supplement medical benefits and enable employees to focus on healing from their illness instead of their bills. For example, after a diagnosis of a major illness, those with critical illness protection could receive a payment ranging from $5,000 to $40,000, which can be used to pay medical bills or cover normal living expenses. Buying trends show that critical illness plans are especially popular among employees in their late 30s and older while younger employees are more likely to purchase accident insurance. Many employers offer both types of coverage to provide financial protection options for all of their employees. Employers that combine voluntary and medical benefits may also be able to improve health outcomes and manage costs more effectively. For instance, health plans that combine medical and voluntary benefits can reduce the duration of disability claims. Upon filing a critical illness or disability claim, plan participants with a chronic condition, such as cardiovascular disease, can get additional support and information. It includes a case manager and advice on exercise and nutrition. These resources help employees get back to health and work faster. JULY 2016

Other integrated programs encourage preventive dental and vision care, helping to stop diseases before they start. Offering voluntary benefits as part of an employee’s menu of options can maximize the effectiveness of a company’s health care dollars. When offered alongside medical insurance, it offers families added peace-of-mind for their health and financial protection. Employers that combine voluntary and medical benefits may be able to reduce turnover, increase productivity, and build a culture of health.

"By helping employees access vision, dental, and financial protection coverage, employers can help create healthier and more productive workforces." Here are some tips to help employers recognize the value of critical illness plans and make the most of this coverage option for employees: 1. Focus on consumer-driven health plans: Identify employers that offer a consumer-driven health plan. These plans often have increased deductibles and the potential for higher out-of-pocket costs. By offering critical illness coverage, these plans can fill potential financial gaps for employees and their dependents, and help pay for non-medical expenses such as child care or lost wages. - CalBrokerMag.com -

2. A ccess to group rates: Buying a critical illness plan through an employer can provide access to group rates, which generally cost less than purchasing insurance independently. In regard to premiums, people can purchase a baseline critical illness protection plan with a $5,000 payout for about $60 per year, depending on factors such as age, location, and industry. The cost for the employee would be about $240 per year for a larger payout, such as $20,000. 3. T he benefits of add-ons: Some health insurers offer benefit packages that enable employees to select from several plans, with the company paying a set amount and employees having the option to pay the difference to enhance or expand coverage. This approach offers companies a predictable and manageable cost while giving employees the opportunity to purchase added benefits that can protect them from unexpected health events. 4. M ake sure employees understand their options: It is important to develop a plan to help employees understand their coverage options and ease the enrollment process. Pre-enrollment communications help employees learn about different plans in a relaxed setting before the enrollment period begins. This allows for at-home discussions with family members about coverage options and needs. 5. You can take it with you: Critical illness plans can be portable, which enables employees to take the coverage with them if they change jobs. Employers are in a unique position to help employees maintain and improve their health, with supplemental benefits playing an important role. By helping employees access vision, dental, and financial protection coverage, employers can help create healthier and more productive workforces. H Gary Harger is vice president of Voluntary Products, UnitedHealthcare CALIFORNIA BROKER | 41

NEW NEWPRODUCTS PRODUCTS people who seek an LTC solution but where the cost of traditional long-term care insurance or their existing health is an issue.” To get the guide, visit www.shorttermcareinsurance.org.

GROUP VOLUNTARY CHIROPRACTIC PLAN Landmark launched a voluntary chiropractic plan for groups with two or more enrolled subscribers/employees. Premiums can be paid with pre-tax dollars. The plan includes a $20 office visit co-payment, 20 annual visits, no prior authorization, and no medical management. Participating employees can save more than 60% off retail when using a Landmark Voluntary Chiropractic Plan. Brokers can download ads about the plan to their website at www.lhp-ca.com/CABrokers/SacramentoAdCampaign. NEW BENEFIT EXCHANGE FOR MID-SIZE COMPANIES The Namely Exchange has teamed up with Cigna. The new employee benefit exchange will enable companies to offer a menu of benefit plans in an online marketplace. The Namely Exchange will launch with 12 health insurance plans from Cigna, from which HR admins select up to five plan options to offer their employees. The exchange will also contain plan options for dental, vision, disability, and life insurance. Employees choose plans in the online marketplace. Elections and changes transmit to Cigna automatically, so enrollment is seamless and coverage is always up-to-date. Benefit deductions feed into Namely automatically, so payroll can be processed accurately and easily. For more information, visit www.namely.com. 42 | CALIFORNIA BROKER

LIFE INSURANCE PRICE COMPARISON SERVICE FOR SCUBA DIVERS LifeQuotes.com offers a service that allows scuba divers to find life insurance at the best possible rates. Founder and CEO, Robert Bland said, “Life insurance shoppers who indicate that they intend to scuba dive only answer four short questions about the type and frequency of diving. In seconds, they can view the best rates for their profile, whether they are recreational or professional divers. For more information, visit LifeQuotes.com. MEDICARE SET ASIDE ESTIMATOR AND MEDICAL R ESERVE CALCULATOR Care Bridge International launched a Medicare set aside estimator and Medical reserve calculator. An extensive medical claims database is used to forecast future medical costs. It includes prescription drug costs, which can average 40% or more of the total claim exposure for medical care and treatment. For more information, visit carebridgeinc.com/Demo. CONSUMER GUIDE TO SHORTTERM CARE INSURANCE The National Advisory Center for Short-Term Care Information released a guide to short-term insurance. Director Jesse Slome said, “Insurance agents have a very viable and sellable solution…for the large number of - CalBrokerMag.com -

ONLINE CLAIMS FOR ANCILLARY BENEFITS Colonial Life now allows customers to file disability, accident, cancer, critical illness, hospital confinement and vision claims online. The process guides them through questions that are personalized for their type of coverage. Customers can easily upload supporting claim documentation from their computer or mobile device. The program won’t send the claim until all required questions have been answered. Once the claim is filed, customers get electronic confirmation the claim has been forwarded to Colonial Life. To use the online claims service, customers can log onto coloniallife.com and click on Individuals & Policyholders. CLOUD-BASED BENEFIT ENROLLMENT EaseCentral has streamlined the administration of HR enrollment and quoting processes for insurance brokers. A process that used to take weeks to complete can be finished in minutes. Brokers can pull quotes and compare information from multiple carriers instantly from any desktop or mobile device. For more information, visit www.easecentral.com. CRITICAL ILLNESS Bankers Life is offering a new critical illness product, “Critical Benefit PLU.S (sic).” The plan covers cancer, heart attack, stroke, end-stage renal failure, coronary artery bypass graft and angioplasty. Critical Benefit PLU.S. covers these additional critical conditions: • Alzheimer’s • Permanent blindness • Permanent paralysis • Permanent deafness • Coma • Major organ transplant—surgery • Major organ transplant—active waiting list • Diabetic amputation If you would like more information, visit BankersLife.com. H JULY 2016

NEWS HEALTHCARE MEDICARE ADVANTAGE 2016 SPOTLIGHT The number of Medicare beneficiaries enrolled in Medicare Advantage has climbed steadily over the past decade; this trend in enrollment growth continues in 2016. The enrollment growth has occurred despite provisions under the ACA that reduce payments to plans. As of 2016, the payment reductions have been phased in fully in 78% of counties, accounting for 70% of beneficiaries and 68% of Medicare Advantage enrollees, according to a study by the Kaiser Family Foundation. The following are study highlights: • Medicare Advantage enrollment has increased in virtually all states over the past year. Almost one in three people on Medicare (31% or 17.6 million beneficiaries) is enrolled in a Medicare Advantage plan in 2016. The penetration rate exceeds 40% in five states. • 18% of enrollees are in a group plan. Employers and their retirees still favor local PPOs over HMOs. • Enrollment is still highly concentrated. If Aetna acquired Humana with no divestitures in 2016, the combined firm would account for 25% of Medicare Advantage enrollees nationwide. UnitedHealthcare and Humana account for 39% of enrollment in 2016. • Premiums were relatively constant from 2015 to 2016 ($37 a month in 2016 versus $38 a month in 2015), although premiums vary widely across states, counties, and plan types. • In 2016, the average enrollee had an out-of-pocket limit of $5,223, which is nearly $1,000 higher than in 2011. • 31% of the Medicare population is enrolled in a Medicare Advantage plan. Total Medicare Advantage enrollment grew 5%, from 2015 to 2016. This reflects the influence of seniors aging on to Medicare and beneficiaries shifting from traditional Medicare to Medicare Advantage. • 6 4% of Medicare Advantage enrollees are in HMOs; 23% are in local PPOs; 7% are in regional PPOs; 1% are in private fee-for-service plans; and 4% are in other types of plans including cost plans and Medicare JULY 2016

medical savings accounts. • Enrollment in private fee-for-service plans has declined slowly since the Medicare Improvements for Patients & Providers Act (MIPPA) of 2008. Under the law, in most parts of the country, private fee-forservice plans must have a provider network. About 1% of Medicare Advantage enrollees are in these plans. 26% of enrollees in private fee-for-service plans are in counties in which private fee-for-service plans are exempt from network requirements. • Medicare Advantage enrollment in California grew 6% from 2015 to 2016. • 4 4% of beneficiaries in Los Angeles County, California are enrolled in Medicare Advantage plans compared to only 11% of beneficiaries in Santa Cruz County, California. • The average MA prescription drug enrollee pays a monthly premium of about $37, which is 1% less than in 2015. Actual premiums are $28 a month for HMOs, $63 a month for local PPOs, and $76 a month for private fee-for-service plans. Average Medicare Advantage premiums for HMOs and local PPOs have decreased since the ACA was enacted while average premiums have increased for regional PPOs and private fee-for-service plans. • In 2016, 81% of Medicare beneficiaries had a choice of at least one zero premium MA prescription drug plan. From 2015 to 2016, the share of enrollees in zero premium MA prescription drug benefits remained relatively unchanged (48% in 2015 versus 49% in 2016). Fifty-nine percent of HMO enrollees are in zero premium plans; 38% are in regional PPOs; and 22% are in local PPOs. No zero premium private fee-forservice plans plans were offered in 2015 or 2016. • The average out-of-pocket limit for a MA prescription drug enrollee is $5,223, up from $5,041 in 2015 and $4,313 in 2011. The share of enrollees in plans with limits above $5,000 has greatly increased across all plan types. Fifty-two percent of enrollees are in plans with limits above $5,000 in 2016 compared to 46% in 2015. - CalBrokerMag.com -

Thirty-seven percent of enrollees in 2016 are in plans with limits at the $6,700 maximum, compared to 32% in 2015 and 17% in 2011. Ninety-nine percent of regional PPO enrollees and 62% of local PPO enrollees are in plans with limits above $5,000 in 2016. In comparison, 45% of HMO enrollees are in plans with limits above $5,000 in 2016. • The standard Medicare Part D plan has a $360 drug deductible and 25% coinsurance up to an initial coverage limit of $3,310. That is followed by a coverage gap (the doughnut hole) in which beneficiaries pay a larger share until their total out-of-pocket Part D spending reaches $4,850. After exceeding this catastrophic threshold, beneficiaries pay 5% of the cost of drugs. • 9 5% of Kaiser Permanente’s enrollees are in HMOs. In contrast, enrollment in UnitedHealthcare and Humana plans is mostly in HMOs, but includes significant shares in local and regional PPOs. Humana’s distribution continues the shift from earlier years when a much larger share of Humana’s enrollees was in private fee-for-service plans. Enrollment in BCBS plans is split between HMOs (46%) and local PPOs (41%), with the remainder in regional PPOs and other plan types including private fee-for-service plans. • Kaiser Permanente’s presence is more geographically focused than other major national employers, with a heavy concentration in California, Colorado, the District of Columbia and Maryland. • Medicare Advantage enrollment could become more concentrated if Aetna’s acquisition of Humana and Anthem’s acquisition of Cigna are approved, particularly if few divestitures are required. If no divestitures are required in Aetna’s acquisition of Humana, the combined company would account for 25% of Medicare Advantage enrollment nationwide. UnitedHealthcare accounts for 21% of enrollment this year. • The Anthem’s acquisition of Cigna would have a less visible affect on the national Medicare Advantage market. Nationwide, Anthem acCALIFORNIA BROKER | 43

NEWS counts for 3% of Medicare Advantage enrollment and Cigna accounts for another 3%. • For many years, CMS has posted quality ratings for Medicare Advantage plans. In 2016, 68% of plans had four or more stars. In focus groups, seniors have said that they don’t use the star ratings to select a plan. Nonetheless, the star ratings may be correlated with factors that seniors do use to select their plan, including provider networks, and plan benefits and costs, and thus may be correlated with enrollment. • The Congressional Budget Office projects that about 41% of Medicare beneficiaries will be enrolled in Medicare Advantage in 2026. This growth may prompt some to question what it will mean if the preponderance of beneficiaries are in Medicare Advantage plans. STUDY SHOWS THAT PRIVATE EXCHANGES HELP RETAIN EMPLOYEES Seventy-two percent of employees using a private exchange say they are more likely to remain with their employer because of their benefit program, according to a new Liazon survey. The survey findings suggest that retention can get a boost from increased engagement and awareness of benefits, including a better understanding of their value in total compensation package. Ashok Subramanian of Liazon said, “The retention case is incredibly strong for private exchanges. The data show us that employees appreciate their benefits more when they are engaged in the process of selection and view the full cost of their plans. As private exchanges become a more popular form of benefit delivery, employers are beginning to recognize the model as a way to communicate the value of the benefits they are offering to their workforce.” When asked to compare their experience using an exchange to the traditional method of benefit distribution, 83% of employees said they are more engaged in their health care decisions and 77% said they value their benefits more. Further, by increasing transparency into employer contributions and the full cost of benefits, pri44 | CALIFORNIA BROKER

vate exchanges help employees better understand and appreciate their benefits as part of their compensation. In fact, 85% of respondents using an exchange, for the first time, said that they are more aware of their company’s contribution to their benefit costs and 81% said they value their company’s contribution more. For more information, visit www.liazon.com. HOW THE ACA IS CHANGING HEALTH INSURANCE MARKETS The Affordable Care Act has brought significant changes to the health insurance market, according to a study by Conning. The objective of reducing the number of uninsured was accomplished at least in part, which is creating growth opportunities for insurers. However, many insurers are reporting significant losses in the new individual exchange market, which is prompting rate increases and causing insurers to question their participation in selected state markets. Many insurers spent significant resources preparing for the launch of the individual market exchanges. The ACA is spurring large scale acquisitions. The industry focus has turned to scale, leading to the mega-merger announcements of last year. Insurers will refine their strategies as the dust settles from the ACA implementation. Medicaid specialist firms will ride the growth and positive performance of their new enrollees. For more information, visit www.conning.com. DATA INSIGHTS FROM THE 2016 ACA MARKETPLACE Robert Wood Johnson offers the following observations about the Affordable Care Act Marketplace: • Carriers made adjustments in 2016 to reduce their exposure to high costs: In 2016, carriers attempted to minimize their exposure to high costs by reducing the number of plan offerings with out-of-network benefits, among other strategies. This change occurred at all metal levels and in all regions. The number of Silver plans that are HMOs or exclusive provider organizations (EPOs) increased from 61% in 2015 to 69% in 2016. The number of Gold plans declined compared to other - CalBrokerMag.com -

metal levels. While the number of Silver plans increased 2.9%, the Gold plans declined by 8.7%. The number of Gold plans declined in most regions. • Regional price variation narrowed: There was a geographic convergence in premium prices in 2016, as premiums rose far more in regions that had lower prices the prior year. Nationally, the distribution of average premium prices tightened in all rating areas. This pattern was less straightforward for deductibles, as many combinations of cost-sharing options are on the market. • Price variation increased within markets: Despite the reduced variation across markets, differences in premium prices increased within markets. The average premium price range increased from 2015 to 2016 in a rating area. This is true for all metal levels and all regions. The distribution has become more skewed, as maximum prices increased more than minimum prices. In 2016, a Blue or a national carrier offered the highest priced plan in a rating area about 75% of the time. • There are still large regional differences in plan design: Plans in the Northeast and West have a much broader range in premium prices and less variation in deductibles. Plans in the Midwest and South have a smaller range in premium prices and a far greater range in deductibles. There were some changes in these patterns from 2015 to 2016, but there are still important regional differences in plan design. • More regulated markets have higher premiums and lower deductibles: Federally facilitated marketplaces with the most plan regulation—CA, CT, DC, MA, NY, RI, VT—had the highest premiums and lowest deductibles. More product changes are likely in 2017. There is room for further reduction in broad network plans. Most entrants in 2016 primarily offer narrow network products. This will probably continue to vary regionally. We may also see further reduction in Gold plans, although carriers must sell Gold and Silver. There are indications that some carriers may reduce their Bronze JULY 2016

NEWS offerings. The number of Bronze plans increased very little in 2016. There may be reductions in some markets in 2017. The actuarial value of Bronze and Silver plans seems to have grown closer in 2016, and average prices are quite close in many regions. While carriers have resisted government calls for standardization and simplification of plan offerings, the industry seems to be standardizing itself through potential reductions in product offerings. Premium prices will converge further. While premium increases are expected, some regions are relatively under priced. A further reduction in regional differences will probably take place. Prices may converge at the levels seen in more regulated statebased marketplaces, which may be more appropriately priced. The weaker markets are smaller, largely rural, have less carrier participation in 2016, fewer plans, and lower premiums. These markets may experience higher premium increases and continued low carrier participation, which will inhibit enrollment gains UnitedHealth Group announced that it will exit 26 markets and participate in three. The company has not announced a decision about five others. In states where UnitedHealth Group is exiting, the insurer was priced relatively lower than others, and there tended to be a higher-priced Blue plan in the marketplace. Exit states weak markets with fewer plans, less growth in the number of plans, a smaller range in premium prices, and below average premiums— despite average or above average premium increases from 2015 to 2016. UnitedHealth Group may have concluded that, due to the small size and low level of activity in certain markets, there would not be enough additional enrollment to offset negative claims experiences, and that it would be hard to raise premiums enough to stop losing money with enrollees. If other carriers follow suit, weak markets may become weaker as they lose carriers and/or experience above average price increases. Humana seems to have positions in weak markets and is priced relatively low in many of them. Humana’s decisions about exiting markets suggests that it may be seeking to reduce its presence in weak markets. JULY 2016

THE COST IMPLICATIONS OF PRIVATE EXCHANGES Private exchanges could encourage employees to select less-generous plans, according to a report by Rand. This could expose employees to higher out-of-pocket costs, but premium contributions would drop substantially, so net spending would decrease. On the other hand, employee spending may increase if employers decrease their health insurance contributions when moving to private exchanges. Most employers can avoid the ACA’s Cadillac tax by reducing the generosity of their plans, regardless of whether they move to a private exchange. There is not enough evidence yet to determine whether private exchanges will become prominent and how they will affect employers and their employees. Workers who choose less-generous plans could risk higher out-of-pocket costs. But their net spending would drop because premiums would drop substantially. Average employee spending could increase if employers lower their health insurance contributions when moving to private exchanges. Private exchanges are unlikely to significantly affect the ACA’s Small Business Health Options Program (SHOP) Marketplaces. For more information, visit rand.org.

STATES ARE IGNORING ACA REQUIREMENTS TO COVER ADDICTION TREATMENT AddictionInsurance plans are not covering the necessary addiction services, according to a report by The National Center on Addiction and Substance Abuse. None of the 2017 - CalBrokerMag.com -

Essential Health Benefit benchmark plans have adequate addiction coverage; and more than two-thirds violate the affordable Care Act (ACA). There is no penalty for states or insurance plans that don’t comply with the law. “People with addiction may not be receiving effective treatment because insurance plans aren’t covering the full range of evidence-based care. Our review did not find a single state that covers all of the approved medications used to treat opioid addiction,” said Lindsey Vuolo, JD, MPH, of The National Center on Addiction and Substance Abuse. The ACA requires plans to cover substance use disorder services, which are under essential-health benefits. The ACA also requires these services to be provided at parity, meaning that they are comparable to medical and surgical benefits. But the ACA does not identify which specific services should be covered. Each state chooses an essential health benefit benchmark plan to determine which addiction benefits must be covered by the ACA plans sold in that state. “The absence of sufficient coverage for medication-assisted treatment for opioid addiction is particularly alarming given the number of people dying or suffering on a daily basis. This kind of health care discrimination would never be tolerated during an epidemic for any other life-threatening disease,” said Samuel Ball, PhD, President and CEO at The National Center on Addiction and Substance Abuse. The report calls on states and insurers to comply with the law and cover the full range of effective addiction treatments. The following are key findings of the report: • Over two-thirds of plans contain language that violates ACA requirements for addiction benefits. • 18% of plans don’t comply with parity requirements. • No plans cover the full array of critical benefits without harmful treatment limitations. • 8 8% of the plan documents are not detailed enough to evaluate parity compliance and the adequacy of addiction benefits. For more information, visit centeronaddiction.org/addiction-research/reports. H CALIFORNIA BROKER | 45

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