Los Angeles Association of Health Underwriters
LAAHU Show Features Health Reform

by Leila Morris

John Nelson, co-CEO of Warner Pacific, kicked off the Los Angeles Association of Health Underwriters (LAAHU) conference (April 21st conference in Woodland Hills) with some encouraging words about how brokers will fare in the new healthcare system, “Companies will need us to write a ton of business.” He stressed that the more complex the healthcare systems becomes, the more brokers will be needed. “You are more important than ever. They will continue to need professionals like us. Congress wrote language into the bill to keep the agency distribution system to ensure that agents can sell for the exchanges. The insurance companies are here [at the conference] because they want your business. They know that brokers can best educate customers. Experts like you will need to educate your clients.”

Nelson said commissions on the individual side would be challenged to go down. But, the small group business will be just fine.

He said that something had to give when it came to the old industry model with unsustainable rate increases. “Raising rates by 15% year after year can’t keep going when medical inflation outpaces general inflation by three to one. The end result is a broken system that someone tried to fix.”
Leslie Margolin, president of Anthem Blue Cross said, “There are 2,700 pages of legislation and we expect tens of thousands of new regulations; we will need your help. There will be roles for each of us.”

Magolin described how she has been personally skewered in the press for Athem’s proposal to raise rates on individual plans by 39% just as health reform negotiations were underway in Congress. She said that the individual insurance business is separate from other products and the rates were based on the cost of doing business in that segment. However, the company has withdrawn its proposal for the rate increase.

She announced an initiative in which hospitals will work together to implement best practices to reduce medical errors, which will also bring down costs. “There is work to be done to get at medical costs. We are good at pointing fingers, at doctors, hospitals, and insurance companies, but we are all responsible for some component of those costs.”

She said that the new health reform law focuses on wellness and expands access for the uninsured. And there is a call for transparency. But it does not address an underlying driver of cost, which is $60 billion in waste, fraud, and abuse in the Medicare system.

She called guaranteed issue an exciting element of the law. It is supposed to require people to get coverage, but there is not a strong enough mandate to get people to opt into the system. “That is an area to lobby to change the mandates,” she said.

Tom Priselac, CEO of Cedars Sinai gave a hospital industry perspective on health reform. “We will see a movement to an organized delivery system between doctors and hospitals to deliver coordinated care…we will see a lot of experiments with the network model.” He also expects Medicare to become much more active in penalizing hospitals for care that is not up to par.
The following are some highlights from a breakout session on the large group market. Carrier executives said the following:
• There will be much higher increases in healthcare costs over the next three years.
• For small groups, distribution -channels may change. Small groups may go online to purchase coverage.
• The HMO price is approaching the PPO price .
• The fee-for-service plan is not the place to control costs in the new healthcare environment.
• Kaiser’s ability to control costs has made it a dominant force in Northern California. Brokers and providers are worried about the trend. Providers have become more open to things like wellness to bring down costs and compete with Kaiser. There needs to be a financial reward like a carrier giving a discount for groups that initiated wellness plans.
• Everyone has become more open to narrow networks.
• Physicians who own a lot of equity will fight bundled rates.
• The Medicare Advisory Board will be making medical decisions.
• As a result of health reform, 80% of California’s uninsured will have some healthcare coverage.
• There will be a greater focus on prevention and wellness.
The following is a summary of the new healthcare reform law by Phil Lebherz, CEO of LISI who presented the information at LAAHU and other industry events:
Approaches to Expanding Coverage
• Requires most U.S citizens to have health insurance.
• Creates state-based exchanges for individuals.
• Creates employer exchanges for small businesses.
• New regulations on health plans.
• Expands Medicaid to 133% of federal poverty level
Individual Mandates and Subsidies
Individual Mandate
Those without coverage pay tax penalty with exemptions:
• Financial hardship.
• Religious objections.
• Native Americans.
• Those without coverage less than three months.
• Undocumented immigrants.
• Lowest cost plan option -exceeds 8% of income
Individual Subsidies
• Income limits for subsidies – 133% - 400% of federal poverty level
• Premium credits or cost-sharing subsidies.
Individual Tax Consequences:
• $695 fine for non-compliance
• Exclude OTC Rx in HSA, FSA & HRA
• Increase excise tax on disallowed distributions from HSAs to 20%.
• Limit FSA contributions to $2,500 per year
Employer Mandates
• Employers with 50 or fewer employees are exempt.
Small Business Tax Credits
• For employers with up to 25 employees
• 2010 to 2013, up to 35% tax credit
• 2014 and beyond, up to 50% tax credit
Insurance Exchanges
• Effective 2014.
• Available to individuals and small groups.
• Can allow large groups beginning 2017.
• Five plan types offered.
• Guarantee issue with rating based on age, area, and tobacco use
Changes to Private Insurance
• Temporary high risk pool (2010)
• Insurance exchanges (2014)
• Carriers’ medical loss ratios
• 80% for small group (100 and below)
• 85% for large group.
• Premium increase review process
• Excise tax on “Cadillac” plans.
• No lifetime limits.
• Dependent coverage to age 26.
• No rescinding except in cases of fraud.
• No pre-existing on children (2010), everyone (2014)
• No experience rating.
• Deductibles not to exceed $2,000/$4,000.
• Limit waiting periods to 90 days.
• Allow states to merge individual and small group plans.
• Small group definition changes to two to 100.
Grandfathering Provision
Current plans are unaffected by mandates, the only changes allowed are the following:•
Can add or delete new employees/dependents.
• Part of collective bargaining agreement.
Exceptions:
• No waiting periods over 90 days.
• Prohibition on lifetime limits.
• New standard for rescissions.
• Dependent coverage to age 26.
• Certain annual limits (group only)
Changes happening in 2010•
Temporary National High Risk pool created.
• Tax credits for small employers.
• Dependent coverage increased
to age 26.
• Remove lifetime limits & prohibit pre-existing exclusion for children.
• Minimum preventive service level without cost sharing.
• Establish premium increase review process.
• $250 Rebate for Medicare beneficiaries.
To sum up the event, it was the most information-packed LAAHU conference we’ve seen in many years. Organizers revamped the sessions to respond to members who wanted more education sessions.