Author Anthony Nefouse

As we enter the 4th quarter of 2010 we have seen major changes in  health insurance. Most of this is do to the health care reform.

In the individual health insurance markets we have seen a decline in carrier competition. There are less plans to choose from and this is a direct result of health care reform.  The health care law did not take into consideration that the individual markets is a small segment for the carriers. In Indianapolis and the rest of the country you can no longer obtain a stand alone children’s policy. The healthcare reform forced carriers to insure children under 19 years of age at a guaranteed issue.  The carriers pulled out of this market.  We have also seen a increase in individual premium because of “Essential Benefits”. Essential Benefits is coverages that now have to be covered under the law.  If you are in the market for an Individual plan you don’t have as many option as you once did. I would advise with taking out a policy with a National Carrier like Anthem or United HealthCare because these companies should survive the healthcare reform. They is much fear in the market plan that smaller insurance companies will not be able to make it. This has everything to do with health care reform.  The medical loss ratio will prevent most if not all smaller carriers out of the individual market.

As we look at small group health we are seeing a lack of competition also. About 75% of all small groups are being max loaded because of on going health conditions. It has become very difficult to move a group plan. Owners now have to consider pro active approaches to group health plans. This mean a level of cost shifting onto the employee. There are techniques to cost shifting that will have a less of an impact on the employee’s morale. If your interested in learning about these techniques contact me.

In the large group market there are some significant changes occurring. Broker and Consultants are starting to change the way they are compensated. There is also a real push for pro active wellness programs. We are even seeing incentives being awarded for completing these types of programs. Predictive modeling for disease management is starting to get attention.

We are expecting big changes in all areas of the health insurance market.

Do you have anyone consulting you on these changes?

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A new estimate has lowered the expected cost of the federal health care overhaul to Indiana’s state government to perhaps $2.6 billion over the next decade — $1 billion less than an initial projection made last spring.

With health care reform we are going to see an expansion of medicaid. This expansion is going to cost the state a lot more money. So our governor is trying to to estimate the cost of health care reform as it pertains to Medicaid.

Robert Damler of the actuarial consulting firm Milliman Inc. told the state’s Medicaid oversight commission on Monday that new information provided by the federal government will drop the possible costs an additional $330 million. The firm in May had lowered its initial estimate to $2.9 billion. The initial estimate of $3.6 billion in a 10 year time period.

When Medicaid is expanded we are going to see a huge cost to the state. As it stand right now there are no incentives to get off of a Medicaid health plan. These plans have very rich benefits to where it cost the insured almost nothing for services.

The  health care reform creates a huge expansion of Medicaid and how are the states going to pay for it?

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In the past few years I have seen an alarming trend of max loaded small group health cases in Indiana. Under the laws a group plan has to be taken by a carrier (guaranteed issue) but the premium can be almost doubled.

We are seeing about 75% of small group health plans (under 50 lives) being max loaded.

At first I thought it was just one particular carrier and then I see this alarming rate with others. I also thought it might be that the group underwriters are all educated in the same manner and this is leading to state wide max loads. Then what really dawned on me is everyone is sick and the cost care keeps going up with medical inflation.

The state of Indiana along with the rest of the country does not take care of themselves and this leads to health care costs.

With the high percentage of max loaded cases it becomes harder and harder to move to a carrier to save money.   The frustration of the small group employer is at a boiling point.  The groups want to provide health benefits to their employees but it will get to the point where it cost to much.

Health Care Reform has done nothing to address these types of issues. The health care bill is universal health insurance at a cost. No where in the bill does it address cost of care.  As we move forward to the health insurance exchanges small groups locally, will continue to drop their group benefits because of cost. The trade off is those small groups will lose their best talent to a company that will pay for health coverage.  Even when the exchanges go into place an employer that is able to invest into the employee’s health plan will have a huge advantage with employee attraction and retention.

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September 23rd has shown us the first phase of health care reform.

We have mass confusion on how the law would effect current health plans. This health care reform was written without taking in to consideration things like math.  The health care reform sounds warm and fuzzy but now we are witnessing what happens when it hits the real life market place. It seems most aspects of the the health care reform was not thought out.

The first big blunder by the administration was the guaranteedissue of children’s stand alone policy. The bill states all children under 19 cannot be declined coverage.  Yet the Gov. does not give any additional details to this law. So now you have the carriers fear that the gaming the system is going to occur. This is where a parent waits for the child to get sick andthen takes out a policy. The next thing to occur is the complete withdraw of every carrier for the stand alone child policy market.  As of right now there are no private companies in this market.

The grandfather status is still a mess.  This law was also not thought through. In the group market most plans will not be able to keep their current benefits. This is because of plan changes. Any increase in benefits loses the grandfather status which creates more cost in premium. What the administration failed to consider is what  happens if the insurance company no longer offers that plan design or if there are change by the carrier to the plan. These are big issues that should have been thought through.

The next major hurdle is the medical loss ratio. This is where 80%-85% of premium has to go to claims. This sounds like a fair deal but back to reality it is going to cause major disruption in the market place. We are already seeing carriers withdraw from current markets. Once the Administrationcomes out with a clear definition of the MLR we could see most small carriers fold. I don’t think it that difficult to under stand why this destroy small carriers. If you have a block of business and you have one group where you make money on and  you have 2nd group that you lose money. The group that the carrier made money on offset the group they lost money on. Now you take that technique a way from the carrier they can no longer can stay in the market.

So far the health care reform negatives far out weight the positives. If these laws were not thought out do you think they thought out the true cost of this reform?

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Workers are expected to pay more for health care coverage in 2011 than in 2010 as part of the steepening rise in premiums and employees’ share of the cost. Experts say that increase could keep workers from getting the care they need.

The average cost of group health insurance coverage is expected to rise 8.8% from 2010 to 2011, the highest increase since 2005, when premiums rose by about 9.2%, according to research from Hewitt.

Workers are bearing a bigger portion of that cost than a few years ago.
Hewitt projected that the average annual health care premium will rise from $4,083 in 2001 to $9,821 in 2011. In that period, employees’ annual insurance premium contributions and out-of-pocket costs will more than triple, from $1,229 to $4,386. The employees’ percentage of costs has risen from 35% in 2001 to an expected 45% in 2011.

Hewitt’s data, released Sept. 27, are based on polling of 350 large U.S. employers, which represent 14.4 million people.

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The Obama administration has granted dozens of waivers to companies so they do not have to comply to the health care reform.

McDonald’s released a statement that their current health plan to the hour employees would  not meet the health care reform requirements. So the administration granted them a one year wavier reported by the New York Times. This is just one of dozen of waiver that have bee granted.

Limited benefit plans have granted waiver because there is no way they can be compliant with reform. I think the administration did not take these types of plans into consideration when they past health care reform. To the surprise of the current administration these type of plans have a lot of membership in this country. The health care reform basically does a way with these type of plans. Limited benefits plan can not comply with any aspect of health care reform.

We are also seeing waivers granted to certain Union groups. The speculation on why they are being granted waivers is that health care reform actually reduces some of their benefits. Durable medical is unlimited under essential benefits but could apply towards some cost share. Under some current plan designs durable medical is covered at 100% but capped. So by shifting the cost on to the insured could be view as a reduction in benefits thus losing any grandfather status. With that kind of shifting it could also be a labor contract violation. Lots of red tape to where it might be easier for the administration to give a one year waiver.

As the first major aspect of health care reform takes place we are already seeing difficult implementation in all areas. States are already seeing smaller carriers pull out of certain markets. In the next couple of months the Medical Loss Ratio will be released. This is the law that carriers must spend 80% or 85% of premium on claims.  This law will have a huge impact on small group and individual markets. The fear in the industry that carriers will just exit these markets thus reducing competition.

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UnitedHealthcare has entered into an agreement to renew medical insurance coverage for The Principals commercial medical plan customers. Here is the news release about the agreement and The Principal’s plans to exit the medical insurance business. UnitedHealthcare will offer The Principal’s customers broad access to quality care with one of the largest local and national care provider networks, highly integrated clinical programs and a full range of affordable products.

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As we enter the 6 month mark of the passing of the health care reform we are witnessing the first negative impacts. 

This week, almost every big insurance company in America—including Aetna, Cigna, UnitedHealth Group, WellPoint, Humana, Coventry, some Blue Cross Blue Shield affiliates and others—stopped writing “child-only” policies in the individual market. This is a niche product that parents typically buy when their employer health plan doesn’t pay for dependents. The exact plans vary company to company and state to state, and the insurers will still offer family policies and make good on the child-only policies that they’ve already sold. But most won’t be writing new ones.

The reason is a regulation that President Obama mentions every time he talks about health care, as he did recently in Falls Church, Virginia: “Children who have pre-existing conditions are going to be covered.” Insurers are now required to cover everyone under 19 when their parents apply for coverage, regardless of health status. The problem with this kind of “guaranteed issue” is that it encourages people, in this case parents, to wait until their kids are sick before seeking coverage.

This drives up premiums for the healthy, encouraging consumers in turn to drop coverage, and eventually it leads to what’s known as a “death spiral,” the industry term for an insurer with rapidly increasing costs as a result of population changes in its coverage pool. The child-only market is a particular death-spiral risk because it is so small and unstable, which explains why so many insurers left in a stroke.

The collapse of the child-only market is a preview of what will happen when guaranteed issue and the rest of ObamaCare comes on line in 2014 for adults, except then insurers will have nowhere to flee. Exiting the market will mean going out of business.

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Should the Republicans take control of the the Congress they are going to try to repeal the health care reform.  One thing that might have a huge impact on public opinion would be to set up hearing on the implementation of the health care reform. If  Congress was able to do a detail analysis of the the bill the public might find many aspect of the law to be disturbing.

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Below are a list of key points that have gone into effect. The new coverages will increase the premium for everyone but may benefit % of policy holders.


Under the new law, health plans are now prohibited from rescinding coverage except in cases involving fraud or an intentional misrepresentation of facts.


The new law prohibits insurance plans both from denying coverage and limiting benefits for children based on a pre-existing condition. This protection applies to all health plans, except “grandfathered” plans in the individual market. These protections will be extended to Americans of all ages starting in 2014.


Under the new law, insurance companies are required to allow young people up to their 26th birthday to remain on their parents’ insurance plan, at the parent’s choice. This provision applies to all health plans.


Millions of Americans who suffer from costly medical conditions are in danger of having their health insurance coverage vanish when the costs of their treatment hit lifetime limits. These limits can cause the loss of coverage at the very moment when patients need it most.


The new law phases out the use of annual limits over the next three years. For plan years beginning on September 23, 2010, the minimum level for the annual limit will be set at $750,000. This minimum is raised to $1.25 million in a year and $2 million in two years. In 2014, all annual limits are prohibited. The protection applies to all plans, except “grandfathered” plans in the individual market.

If you are purchasing a new plan, you will have the following additional protections:


Under the new law, insurance companies must cover recommended preventive services, including mammograms, colonoscopies, immunizations, and pre-natal and new baby care, without charging deductibles, co-payments or co-insurance.


The new law guarantees the right to an “internal appeal.” Also, insurance companies will be prohibited from denying coverage for needed care without a chance to appeal to an independent third party.


The new law: 1) guarantees you get to choose your primary care doctor; 2) allows you to choose a pediatrician as your child’s primary care doctor; and 3) gives women the right to see an OB-GYN without having to obtain a referral first.


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