Author Anthony Nefouse

In 2003 the Medicare Prescription Drug, Improvement, and Modernization Act went into place and created the Health Savings Account.

The health saving account is a high deductible health insurance plan.  All medical claims go towards the deductible for the exception of wellness. All preventive and wellness procedures are covered at 100% with no cost to the insured.  The best way to look at these plans is they are major medical policies that will cover you for the major claims and you are responsible for the small things. 

The health savings account makes it easier for families and individual to budget for health care expenses.  Once your deductible is satisfied then all eligible claims are covered at 100% depending on the plan design. With this plan there are also tax advantages.

I think everyone should look at this approach to health insurance. The health savings account engages people to look at their health care expense and I think that is very important. If you take advantage of online tools then you will discover that diagnostic test you  need has a huge cost difference. The hospital might charge $2,000 and an outpatient facility charges $400.  If the first $2,000 in claims comes out of your pocket I think you might want want to use the facility that charges less.

Now is the right time to entertain this approach to health insurance.

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Here at Nefouse & Associates we have been insuring children that suffer from Autism for almost 5 years. I feel we are the most experienced Brokers in the state when it comes to insuring  autism.

The past few years children suffering from Autism have been very fortunate with the Indianapolis Autism mandate. Under the mandate Autism has to be covered as any other illness with few limitations on treatment.

Anthem has been the leader in the health insurance industry for treating Autism. They have set up their own claim division that has processed claims. The majority of these claims have come from out of network providers.  Anthem has treated these claims as if they were in network providers because they have not established a network for Autism.  The Autism providers have been able to treat patients and be paid without joining any kind of network.  This is about to change!

Currently Anthem is building a Autism network. This is going to change the way people are treated for Autism. In the near future Doctors, Facilities, and Specialists will have to be a part of the Anthem network or the claims will go toward out of network deductibles for policy holders. This could create a disruption in treatment and payment for both patients and providers.

On the provider side of it if they do not join network they might have problems getting paid by the carriers. If its a out of network claim then the insurance company could send the payment directly to the insured.

On the patient side if the claim is considered out of network then carrier could usual and customary charge for the claim. This means the provider charges $500 for a procedure but the insurance company states the average price for this is $200. The insured its stuck with the difference.

Anthem is building this new network and its not expected to go live until April. If Anthem is building one then the other national carriers are not far behind.

If you have a loved one suffering from Autism then start asking questions of your provider about them joining a network.

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There is been a much higher demand for the short term health policies here in Indianapolis than in the past. I think the reason for this is the lower cost of the short term policy.

In the past short term policy were manily used by students and singles that were in transition from one health plan to the other.  Now it has changed a great deal. We are seeing families looking into short term policies.  A family that would cost $400 a month on an H.S.A can pick up a short term for $100 a month.  With so many dual income families losing one of those incomes these short term policies are becoming serious options.

We have seen a variety of short term plans hit the market in the last 3 years. In the past there were only emergency room type policies to choose from. Now we are seeing co pay type plans being introduced. These co pay plan might even have a rx benefit. So now a client can choose what level of short term policy they would like.

If you are serious about taking out a short term policy then you should be looking at a company that owns their own network. The reason for this is you have to use it you want the deepest discounts available. The deepest discounts are going to come from companies like UnitedHealthcare and Anthem.  Smaller carriers can be competitive in this market but I would advise a client to take a short term policy form a national carrier.

If you do take out a short term policy remember that policy is not re newable.  This is a major different when comparing short term policy with a long term. So if you get diagnoised with something major you might have trouble finding a policy to cover you.  This is a very serious issue when comparing.

In the near future I expect to see short term policies that have 11 month terms. That mean you will be able to take a policy out for almost a year. I see this a quick fix not only for the very young but the family market too.

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Under the health care reform children under 19 can not be denied or pre x on health insurance. This law is now in place and the carriers have developed strategies on the law.

The first thing the carriers have done is completely with drawn from the stand alone children’s policy. So now in this country you are unable to buy a stand alone health insurance policy for your child. The carriers were very concerned that parents would game the insurance market. This means that a parent might wait to take out a health insurance policy on the child until they need it. Since the Government would not address this issue the carriers just  pulled out of that market.

So the only way to insure a child in the private market is for a parent to be on the plan also. This has created some unique situations. The carriers will except the entire family but they now are rating the children up 200% for any on going health conditions. This strategy is making the health insurance unaffordable for most family that have children with medical conditions.  A family of 4 that should run around $400 a month now is over $800 if they have children with major medical conditions.

From the insurance carrier stand point even with the rate increase they will still lose money. Any child needing major health care is going to incur much more than the annual premium in claims.  If a family is paying $9,000 a year in premium plus the deductible but they incur $25,000 in claims the insurance company is going to lose. So then how long will the carriers be able to sustain writing those policies.

This is a very complicated situation that the health care reform has caused.

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The new Medical Loss Ratio will have a huge impact on health insurance companies. There is major concern in the industry that we could see some carriers pull of certain markets. The market that creates the most concern is the Individual market. This segment of insured represent a small portion of the overall block of business. Some companies will look at this block of business and ask themselves is it worth the risk.  In the individual market a company might make money on one policy but then lose 300%  on the next policy. In the past they have been able to pool the policies together to offset risk. This pooling is no longer an option for the carriers with the health care reform.
The Patient Protection and Affordable Care Act (or health care reform law) added a new provision to the Public Health Service Act that sets requirements for the minimum medical loss ratio. The medical loss ratio is the percentage of premiums that insurers spend on medical care (including claims and activities that improve health care quality), as opposed to the percentage spent on administrative expenses.Health insurance issuers offering insured group or individual coverage must meet the following minimums:

85% in the large group market

80% in the small group and individual market

Issuers who do not meet these minimums will be required to issue rebates.

The National Association of Insurance Commissioners (NAIC) was responsible for recommending to the U.S. Department of Health and Human Services which activities count as medical and quality improvement expenses, as well as how plans should calculate the medical loss ratio. The interim final regulations issued by Health and Human Services on November 22, 2010, adopted the NAIC’s model regulation in full but modified some of NAIC’s recommendations and added other provisions to the NAIC model.

Some key points from the interim final rules:

Medical loss ratio calculation would include premium used to pay medical claims and premium used for quality improvement activities. It would exclude federal and state taxes, and licensing and regulatory fees.

Issuers will need to report calendar-year premium, claims and other expenses for all insured group and individual health insurance coverage as an aggregate by legal entity state by state and by health insurance market (small group, large group, individual).

Reports must be submitted to Health and Human Services by June 1 of each year. Rebates must be paid by August 1 of each year.

The medical loss ratio provision does not apply to self-insured or ASO plans; it applies only to the issuer of insurance plans in the large and small group and individual markets.

Rebates will be provided to the enrollee (defined in the interim final rules as anyone covered by a group plan, as well as anyone covered by an individual policy, despite the fact that this term is not ordinarily used in the individual market).


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Indianapolis based companies are having less options for group health insurance.

In the last year we have seen multiple carriers pull out of the health insurance market. Principal recently announced that they will no longer provide group health insurance in the state of Indiana and the rest of the country. Humana has chosen to no longer write new group health business for most of the state. They still have a handful of counties that they are writing in.  American Community has been taken over by the Department of Insurance in Michigan.

The main players in the small group health market are Anthem & Unitedhealthcare. These two companies are national companies that own their own networks. Owning their own network gives them a huge advantage compared to a company that rents the network. These two companies are also cutting edge when it comes to technology. They both have wellness programs and disease management pr0grams. These tools can have a major impact on an employee who wants to make life style changes, shop diagnostic services, view facility quality reports. These companies are also the leaders in the large group market.

There are some smaller health insurance companies that could be a good fit for companies. Assurant has developed very creative plans. These plans can reduce premiums. Advantage which is available mainly in the Indiana is an HMO. The HMO model can work if you are OK with the network. Consumers Life is another company that is showing some promise. The are currently developing their own network here.

All of these companies are choices for coverage in the employee health market. Its finding the right plan for you company that is key. That’s why its very important to use a broker that know the market place.

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Right now the state has taken the federal grant to explore setting up a state base exchange vs a federal exchange.

This is very important on the future of health insurance and health care in the state of Indianapolis.

If it is a state based exchange then we should see competition within the carriers operating inside of the exchange maybe. We would also see the agents role with assisting people on obtaining the best plan.  We are fortunate to have a department of Insurance that works towards finding the best possible option for an exchange. Currently two models are being analyzed. That would be Utah and Massachusetts exchanges. Utah has developed their exchange with lean towards employer based plans. This is where small groups can participate in the exchange. They have had major problems with keeping the exchanges competitive. They also have run into problems with employers being able to admin a small group plan. The Massachusetts exchange is more of a universal health plan with state mandated coverage.  Premiums are very high where a Family of 4 costing $17,000 a year.  The Mass. exchange has major problems because the carriers are losing money and can not stay solvent long term.

If the DOI decides that a state based exchange has really no chance to help Indy residents they will shift it to a Federal Exchange. A federal exchange might have little success in helping Indianapolis residents. Right now the federal government might not see the role of the agent/broker as important. They might establish federal employees that are called health navigator to help people on health insurance. The navigators would not be licensed or be held accoutable for advise that they give. It is also thought that a federal employee will not work as hard a broker/agent that is paid on commission.  The federal exchange might have problem with recruiting carries to participate in it.  In fact we might see carriers that decide to compete against the exchange.

One of the big issues of the health care reform law that must be clarified. Is the tax credit or subsidy for the exchange. If there is a tax credit that mean people will still have to pay the full premium and wait to get the tax credit back. $17,000 could be difficult for most families to pay and then wait for the credit. If its a subsidy then the federal gov. could pay a portion of the premium towards the carriers which would no doubt lead to a higher premiums.

Its going to be very interesting to see what happens on the exchange.

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New Rule for Grandfathered Plans

Under the Patient Protection and Affordable Care Act (PPACA), health plans that existed on March 23, 2010 are generally considered “grandfathered plans.” Grandfathered plans are exempt from some of the health care reform requirements, including coverage of preventive care services with no cost-sharing and patient protections such as guaranteed access to OB-GYNs and pediatricians.

Regulations were issued on June 17, 2010 regarding grandfathered plans. These regulations provided that certain changes to an existing plan could cause the plan to lose its grandfathered status. For example, plans could lose grandfathered status by significantly increasing costs or reducing benefits under the plan. Under the initial rule, plans would also lose grandfathered status by changing insurance policies, even if no other prohibited changes were made to the plan.

The Departments of Labor, Health and Human Services and Treasury (the Departments) have now amended the grandfathered plan regulations to permit insured group health plans to change insurance policies or carriers.

Under the amended rule, group health plans will no longer automatically lose their grandfathered status merely because of a change in the plan’s insurance policy, certificate or contract of insurance. However, making any other prohibited change will still cause a loss of grandfathered status.

Reasons for the Amendment

The Departments stated the following reasons for reversing their position on this rule:

  •  The initial rule treated insured group health plans differently than self-funded group health plans. Insured group health plans were not able to change issuers or policies without  losing grandfathered status, while self-funded plans could change their third-party administrators (TPAs), as long as they did not make any other prohibited change. The amended rule allows all group health plans to keep their grandfathered status when changing insurance companies or TPAs.
  • A group health plan may not have a choice about changing its insurance issuer; for example, if the issuer withdraws from the market. Under the new rule, the plan sponsor can maintain grandfathered status if it has to contract with a new issuer.
  • The initial rule unnecessarily restricted the ability of issuers to reissue policies to current plan sponsors for administrative reasons not related to the underlying terms of the plan. Issuers can now transition policies to a subsidiary or consolidate policies without losing grandfathered plan status.
  • The initial rule potentially gave issuers undue and unfair leverage in negotiating the price of coverage renewals with grandfathered plan sponsors, which could interfere with competition and cost containment
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Small group health insurance can be difficult. The last few years has created a lot of shifting on to the employee in both cost and risk. This has mainly been because of the price of health plans and the economy. If small a company revenues are off its difficult for them to absorb a rate increase on the health insurance.

I have started to witness a alarming trend in the small groups. Employee are starting to ask to have their employee status changed. So an employee might come to the owner and asked to be a 1099 contract employee. One of the reason they might do this is so that they qualify for a subsidized health plan. This is whats called “gaming the system”.

With all of the cost shifting that has a occurred there are many small group health plans that have large deductibles. So if an employee is having a baby they might owe $2,000-$5,000 for that child birth. If they are able to qualify for a subsidized plan through the state then that child birth could cost them nothing.

So if you are small business owner with a high deductible plan in place an employee could be trying to game the system.

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This will be the 7th year since Health Savings Accounts have been available.  We have seen a few different plan designs since inception but the principles have stayed the same.

The Health Savings Accounts in Indiana have been much more popular than other states. There are few theories on why this is but I think it has alotto do with price. When Health Savings Accounts were first introduced they had savings in 30% -45% range from a traditional plan. Now one has to realize just 7 years ago lower deductible type plans were much more common. So switching to an H.S.A and then using the savings from the old plan to fund your H.S.A custodial account was a easy decisions.

The HSA plan was the 2nd step towards developing consumer driven insurance products. The first was the Medical Saving Account.  The HSA plan is a major medical policy which promotes consumerism be informing insured what the cost of medical services are. Since the insured is responsible for the deductible one becomes very aware of the cost of an office vistit, Brand name drugs, a trip to the ER and so on. These plans have really taken the first step in price war with health care provider. The best example of this is the drug prices between the pharmcies. When Walmart came out with the $4 generic its threatned the all the  major pharmacies. The pharmacies have started to compete from a price standpoint. Another huge step for consumerism is when Anthem and United HealthCare came out with their own version of the price shoper for the HSA clients. This tool truly has show the cost difference from what a hospital charges and what an outpatient facilty charges.

As we enter the 4th quarter of 2010 the HSA is still a very popular choice with individual & small groups. These plans are even gaining traction with large companies.

For the individual health plan its by the far the best option. Why pay for benefits like a co pays that you  might not use.  A lot of people still say I don’t want to lose my co pays. The truth of the matter is when you see that primary care doctor you are still getting the network discount. That means those services are discounted anywhere from 35%-50%. So if you have a $100 office visit you might owe $50. When you compare the premium savings on an HSA it makes sense to go with that plan.  The RX benefit is where there can be real issues. If you are on a brand name drug and there is no generic then you end up paying for the cost of that drug and it chips a way at the deductible.  What people fail to realize is if you qualify for a individual plan with RX coverage the carrier will rate you up for that condition so you end up paying a much higher premium. When we compare the higher premium plan with the HSA plan and the cost of the drug there is a good chance the HSA makes more sense.   The fact of the matter no mater what individual plan you are on the premiums are going to go up at renewal but you have a much better chance of getting a single digit rate increase on a HSA.

The HSA for the small group is still a very good option. If a group is going that route its very important to include a min wellness program and price comparison tools  so that the employee can take an active role in their health care. Now in the small group market we have seen some problems with the H.S.A approach from cost stand point. 9 times out of 10 an HSA plan is a better plan than the current plan design. This is because the out of pocket for the employee can be much less than the traditional plan that has co insurance. So now an owner/controller is only seeing a 10% reduction in premium compared to the co pay plan that has 3 times the out of pocket.  The other reason why we are not seeing huge savings on the small group HSA plans is claims. Once an insured meets their deductible they now feel all treatments are free.  Even with this said the HSA is by far the best option for a small group health plan. Its one way that an owner can try to educate the employees on true health care cost while still proving the best coverage.

Large groups are starting to really entertain the HSA approach because of the consumer driven principles.  Many large groups are now adding an HSA option to their cafeteria plan. Data that has been collected over the last 6 year on these type of plan are showing a significant savings from a claims standpoint.

If you are looking for a new health insurance plan you have to entertain the health savings account.

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