Author Anthony Nefouse


doctor-medical-medicine-health-42273-largeWith this year’s open enrollment getting closer, one thing has become very clear, the individual health insurance market is near complete collapse.

For Indiana, we have seen Humana, Assurant, UnitedHealthcare, & now Physicians Health Plans all exit the individual market. Every carrier has had different situations for leaving, but one thing in common between all is financial loss.

The medical claims from the individual market, have been higher than anyone could have ever projected. After 3 years of claims data, carriers are now seeing just how difficult it is to break even in this market. Then we add government programs that make it advantageous to manage risk by forcing those companies to pay; when they do a better job than expected. This all leads to an individual market that is very different than what the authors of the ACA thought it would be.

For 2017, there will only be one individual carrier operating in all Indiana counties, Anthem. They will have plans both on and off the exchange. If you are eligible for a tax credit, that may be the plan that will give you network access. The other companies patriating on the exchange, are Medicaid carriers that have developed extremely narrow networks. Those carriers are an extension of Medicaid.

With Anthem taking on the entire states individual risk, who knows where the rates will go. This year they filed for a average of a 28% rate increase. That was prior to the exiting of PHP & now IU from the exchange plans.

The current individual market is not sustainable for anyone that is not eligible for a tax credit. Premiums have skyrocketed and will continue to rise. The out of pocket maximum are beyond affordability for most Americans.

The ACA has given coverage to Hoosiers that were denied policies prior to the ACA. The marketplaces have also made it’s more “premium” affordable for Hoosiers to get access to health policies.

At what price?

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When the Affordable Care Act was put into motion, many small Indiana companies chose to drop their group health plan. At that time, it was the right decision for multiple of reasons. 

To start with, individual plans were no guaranteed issues under the ACA.  One of the biggest benefits to group health plans is they are guaranteed issue. This means that an enrollee cannot be denied for preexisting conditions.

The next reason to drop the group health plan was government tax credits. If an employee qualified for tax credits, those credits may be far more than what the employer could give in premium contributions.  This lead to huge saving for small companies.

The other benefit was the employee to could an elect a plan design that best fit their needs. The employer was no longer making that healthcare decision for the employee.

Now going into 2017, the benefits of the individual plans are not as bright as they once were. 

Individual plans are still guaranteed issue but the out of pocket max has increased significantly. For 2017, the OOPM is going to be $7,150 for a single & $14,300 for a family. Individual policy holder is having a hard time keeping up with the financial burden of the OOPM.

Tax credit have steadily decreased in Indiana. From the first year of tax credits, we have seen a steady decline of tax credits around 30% a year.  That family that was benefiting from the large tax credits are now starting to pay much higher amounts. It’s getting closer to what the group health plan use to cost them.

People in general no longer want to deal with the federal marketplace. If any problems occur with the federal exchange, it can take years to resolve. There are plenty of horror stories of policy holders getting hit with extreme situations where the market place changes plan design on them and they have claims. These employees are starting to miss the days when their employer made the health care decision for them.

Owner & key employees, no longer have the option of health plans that offer a large network. In 2017, there will be no individual health coverage that offers a PPO plan.  All of the plans being offered will have narrow networks. This can create a disruption in care. 

Increased premiums for middle and upper class, for those Hoosiers that are not eligible for tax credits on the exchange, they have experienced large rate increase every year. Now they are still going to have a large rate increase but now they don’t have access to a PPO plan. Along with this, they are being faced with huge out of pocket maxes.

Now we come full circle back to the small group health plans.  Owner and decision makers are being faced with putting a group health plan back in place.  They may choose to do for their own coverage or the health plan can once again create some level of benefit morale. It’s fair to say at this point, the individual health plan under the ACA, cannot replace a group health plan.

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Aetna had filed with the Indiana department of Insurance to offer individual plans for 2017. Aetna was to be a welcomed option for individual policies, especially because it looked like they were going to the Franciscan Alliance as their network.

Recently, Aetna announced that they were withdrawing their filling, from Indiana and 4 other states. This came on the news that company had lost up to $300 million operating on the federal exchange.

This is a huge blow to Indiana, there will be no individual policy that will have access to the Franciscan network (that could change).  This will lead many Hoosier in a serious dilemma, they will no longer have access to their doctors. For people current insured through United Healthcare, on or off the exchange, those networks have access to Franciscan.  As it stands, these people will lose access in 2017.

For Hoosiers that live South of Indianapolis, this is going to be a problem. If your health insurance is an individual plan, in 2017 Community Hospital South will be your only option for care outside of emergency.  If you are located inside 465, then IU Methodist may be your only option.

This going to cause a huge disruption if things stand. This is not to say that Franciscan could join another network before Jan. 1st.

How can a national company like Aetna, spend all the time and resources to offer coverage, and then just pull out? 

It’s called the Risk Adjustment and it was one of the key factors in the Affordable Care Act.  If a company does a better job handling risk, then they have to pay. That money is then given to the company that did not handle risk well. With Aetna announcing the $300 million loss in the federal exchange market, lead most health insurance insiders to believe they had to pay a large sum to the Risk Adjustment program.

This may appear to be a knee jerk decision, but it is more calculated than it looks.

The ACA is penalizing companies who are better at controlling risk, their intentions were to create a more level playing field but it’s the exact opposite.  It’s driving companies out of the market.

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healthFor companies with less than 50 employees and that have a ACA compliant group plan, renewals are difficult to understand.

Pre ACA group plans, renewals were based on claims and medical trend. Renewal rates were easy to understand, if you had a bad claim year, then you saw a significant rate increase. If you had 22 employees on the health plan, someone had cancer treatment, this led to a 34% rate increase. The majority of owners and controllers could understand that. That does not mean they were happy, but it made some kind of sense.

Small group plans under the affordable care act, are renewing under a different equation. No longer can an insurance company base rate increases off of a groups claim history. The health insurance companies are determining the rate increase under a different set of guidelines.

Claims Pooling

An insurance company is using the claims data from the state pool of small group health plans. They take the claims data from all of their groups covered in the state, then equate a % of increase based off those loss ratios. In Indiana, United HealthCare Small Group is adding about 7% based on claims pooling.

Medical Trend

Medical trends have always been included in rate increases for both small and large group. There is a big disparity on each insurance company medical trend. Anthem may have a medical trend at 8% and United Healthcare may have 5%. The Indiana department of insurance has challenged carriers on how they are determining medical trends, but that info was never made public. Anywhere from 5%-8% of your renewal is based on medical trends.

Just off claims pooling and medical trend, we are at 13% increase. It’s getting ugly!

Plan Design

The carriers are looking at utilization they have on any particular plan design. If any particular plan design is incurring large losses, they remove it for the following year. Then the next closest plan design has a couple % increase, which is around a 2% increase.


If you are running composite rates on your group plan, which most groups do over 10 lives, age has always impacted rate renewals. Pre ACA, we had age brackets so there was not an increase until the next bracket. If an employee turned 35, that creates a rate increase, but if they turned 34, that did not impact. Now under the ACA, every birth date has an increase in rates. Right now, we estimate that every year a small group is receiving a 2% increase because of age. Where this is having a huge impact is if the group adds new employees that increases the average of the group. If the group goes from an average age of 45 to an average age of 50, this increases the premium 10%. On a group of 20 lives, it’s very easy to have this type of age increase by adding a couple of older employees.

Under the ACA, fully insured small group health insurance, could be going up an avgerage of 17% a year. For those companies that recruit new employees that are older, you could very easily be looking at a 25% rate increase.

Here at Nefouse & Associates, we developed strategies to reduce this burden on small companies.

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Insurance coverageWhat is COBRA?

  • It is the Consolidated Omnibus Budget Reconciliation Act of 1985
  • COBRA is a law passed by the U.S. Congress in 1986 that mandates an insurance program to give eligible employees the opportunity to continue health insurance coverage after experiencing the loss of active coverage

What Employers are Subject to COBRA?

  • Almost all group health plans are subject to COBRA
  • Some small employer plans are not subject to COBRA
    • If a small employer has less than 20 employees employed on a typical business day during the previouscalendar year, then the group is exempt from COBRA the following year
    • If an employer has employed fewer than 20 employees on at least 50% of its typical business days during that year, then the group is exempt from COBRA the following year
  • If you have any questions regarding the group’s eligibility for COBRA, please contact legal counsel

What Plans are Subject to COBRA?

  • COBRA applies to group health plans that provide health care and are maintained by the employer
  • Group health plans may include:
    • Medical
    • Dental
    • Vision
    • Flexible Spending Account
    • Health Care Reimbursement Arrangement
    • Employee Assistance Program
  • Note: Health Savings Accounts are not subject to COBRA

What Qualifying Events Trigger the Obligation to Offer COBRA Coverage?

Qualifying Events trigger COBRA if they cause a loss of coverage. These possible events are:

  • Termination of a covered employee’s employment
  • A reduction of a covered employee’s hours of employment
  • The death of a covered employee
  • A divorce or legal separation from the covered employee
  • Ceasing to be a dependent child under the requirements of the plan
  • The covered employee becoming entitled to Medicare
  • Employer bankruptcy (this applies to retiree plans only)
  • Note: Not all events cause a loss of coverage
    • Coverage dropped during open enrollment is not a COBRA qualifying event

What is a Loss of Plan Coverage?

The general definition means to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event

  • A loss of coverage includes:
    • Loss of group health coverage
    • An increase in required premiums
    • A reduction of benefits
    • Any other change in terms or conditions of coverage

How Long can COBRA last?

  • The maximum coverage period for a termination of employment or reduction of hours is 18 months
  • Other qualifying events (if a loss of coverage occurs) that extend the maximum period to 36 months for dependents include:
    • Death of employee
    • Divorce or legal separation
    • Child’s loss of dependent status
    • Employee’s entitlement to Medicare
  • If the employee is certified by the Social Security Administration to be disabled within the first 60 days of COBRA coverage, the maximum coverage period may be extended to 29 months if the participant notifies TPA within that first 60 days

Loss of Coverage/Election Notice Procedure

  • Employer has 30 days after the COBRA qualifying event to notify TPA. TPA has 14 days to mail a COBRA Election Notice to the Qualified Beneficiary
  • Complete a Termination Template for your respective Qualified Beneficiaries
    • Instructions are included on the ‘Instruction’ tab of the spreadsheet
  • Upload the Termination Template via TPAs secure File Transfer utility
  • TPA will mail a COBRA Election Notice to the Qualified Beneficiary
  • If Qualified Beneficiary elects COBRA coverage, TPA will reinstate coverage with the carrier(s) upon receipt of initial premium payment
  • Payments collected from COBRA Participants will be forwarded to the employer to pay for the insurance premiums
  • TPA will notify the carrier(s) when Participant terminates from COBRA coverage.

Procedure for Qualified Beneficiaries & COBRA Participants

  • Qualified Beneficiary will receive a COBRA Election Notice
  • Qualified Beneficiary elects COBRA by returning completed election form to TPA within 60 days from the date the Election Notice was postmarked or the loss of coverage date, whichever is later
  • TPA will mail courtesy payment coupons to the participant
  • Participant has an initial 45 days grace period, to pay premium/s
    • After initial 45 days grace period, premium due dates revert to the standard cycle with the due date on the first of the month of coverage and a 30 days grace period
    • Checks, money orders and/or online payments are accepted
    • Payment is mailed to: TPA
    • Detailed payment instructions are included with the payment coupons
  • Once participant remits initial payment, TPA will reinstate coverage with the insurance carrier(s)
  • If payment is not received within the grace period, carrier(s) will be notified to terminate COBRA coverage
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groupNefouse & Associates, Inc. is proud to be one of the chosen Insurance agencies to be able to offer the IU group health plans. We are especially excited to be able to offer this solution to small companies.

Since the inception of the IU group health plans, there has not been an outreach to the small companies. This has now changed and IU would like to offer these plans to all size companies.

The IU Health group health plan is not a traditional HMO. The group plans offer a dual network, which provides access to your employees outside IU Network. These plans even offer options to members inside the IU network. This gives companies great flexibility in offering their employees a competitive priced solution.

IU is offering a full line up of plan designs. From rich benefits with 1st dollar copays to health saving accounts. They are also offering a level funded option, which looks and feels like a full insured plan, but it has the ability to give the group a refund on a good year.

If your company is over 50 employees, then the case will be underwritten. IU underwriting is very aggressive, which can lead to lower premiums. With IU owning the medical network, this helps to control medical costs which can lead to a lower costing health plan.

In the last few years, there has not been a lot of competition in the small group market. With the IU health plans, we have one option to help companies of all sizes to offer a competitive employee benefit package.

Contact us today

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Recently I was interviewed by Indiana Public Media about proposed marketplace spikes. In the article it mentions that four out of the six insurance companies planning to offer coverage to Hoosiers through the federal healthcare exchange next year are proposing double-digit rate increases for individual premiums, according to proposals filed with the Indiana Department of Insurance.

Why is this? 

In my opinion, insurance companies still haven’t been able to balance the federal insurance mandate with the fact they can’t deny people insurance coverage in addition to the fact that insurance companies are just now learning how to navigate government programs. This has given insurance industries just a few years to bring premiums to what they should be based on claims made.

Want to learn more about the spikes? Read more here.

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healthcare2017 individual and small group health plans have been submitted for review. There is very little good news to report about.

United Health Care exiting the market is the biggest blow to network access for Indiana. The UnitedHealth Choice & Choice plus were actually employer based networks. Off exchange was the last Individual PPO network with choice. On the exchange was an EPO network. These networks were designed for small groups, which gave members access to the majority of medical providers.

Why Did UHC pull out?

We have now seen multiple carriers pull out of Indiana and the rest of the country, this has to do with decision making based on pre ACA knowledge. Humana & Assurant both offered PPO plans similar to UHC’s. In a post ACA market, that leads to only one thing, higher medical costs. If a consumer has doctors in 3 different networks, there is a higher probability they will have higher claims. UHC had this knowledge, but were unable to act on it, until it was too late.

UHC took on a large national footprint for distribution of the individual plans. This led them into markets where there were extremely high risks and this risk was unknown.

The bottom line, leadership took on too much risk which lead to financial loss. Once the risk was on the books, they could not remove it. Actually they created adverse selection by being the most expensive in the market. This leads to only the high utilizers staying on the plan and no low utilizers joining because of the cost.

As with Humana & Assurant, the only move UHC could do was to drop out of the individual health insurance markets.

Impact to Indiana?

The loss of UHC will have a huge impact on Indiana residents. For those members that have doctors in multiple networks, you may not be able to replace that access. The Hoosiers that live on the border of another state, may experience a loss of access to those out of state providers. For those who want to able to get a second & third opinion, that option may be over.

For individual health insurance in Indiana, you have to elect an HMO. A family might have to choose to use one family doctor for everyone, the pediatrician will have to participate in that network and the OBGYN will also have to be in network.

When shopping for health insurance coverage, it may be more about the medical facility that the health plan is associated with. If you are eligible for tax credits, then your plan could be an even narrow network.

Silver Lining with limited access?

If you no longer have access to multiple health networks, then the insured might want to build a relationship with their doctors. Creating a relationship with one’s doctor may not only be a necessity, but a requirement to insure a higher level of awareness on your family’s health care.

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CMS recently released guidelines for transitional group health policies under the Affordable Care Act. This impacts any health insurance plan that is considered grandmothered. A grandmothered group health plan had an effective date prior to 2014. These group plans should cost less than current market options and that is why these new rules are important.

The guidance from CMS and the approval by the Indiana insurance commissioner, has created some interesting scenarios for renewal dates they are the following:

Group health plans renewing July 1st 2016- October 1st 2016

  • Most carriers are going to give a standard 12 month renewal.
  • Then in 2017, the group will be given the option of a short renewal to Jan. 1st 2018.
  • The group plan at that time will be moved to a nACA group policy.

Groups renewing November 1st 2016 and December 1st 2016

  • These companies will have the option to move the renewal date to October 1st.
  • In order to keep the grand mothered status until January 1st 2018, group plans will have to have a changer the renewal date to October 1st.

Since 2014, small group health plan in Indiana have had to change effective dates multiple times. This has to do with the Indiana department of Insurance, under ERISA guidelines, not allowing small group health insurance to have a an renewal cycle longer than 12 months.

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It would be wishful to say that group health insurance under the ACA has stabilized. Comparing it to the Individual market under the ACA, the group is calm.

For companies with less than 50 full time employees, or the equivalent under 50, fully insured products are guaranteed issue. This mean there is no underwriting. When employees complete applications, they are not asked any questions about current/past health conditions. The cost of the plan is based on county, age of the employees & plan designs. This can be an advantage for companies that have younger employees. The younger employees can reduce the rates through composite rates. This can have a huge impact, if a company and the employees can afford the health plan. We have been able to get the employee rate down as low as $239.

The county where the company is located act will impact rates. Under the ACA, this is perfectly acceptable to increase or decrease rates based on the county. If a county has had a history of higher risks/claims, then the group health plan can and will cost more.

Plan design has the largest impact on group premiums. The two main carriers in Indiana are UnitedHealthCare (UHC) and Anthem. They are really the only carriers that are in the small group fully insured market.

Anthem small group plans designs, really have not changed much under the ACA. The plans are somewhat straight forward. The deductibles & office visit copays have stayed the same. Anthem has slowly started to change their prescription drug co pays. The one aspect that has changed is the out of pocket max. These have increased under the ACA. As it stands Anthem is not competitively priced in the small group product. This is by choice.

UHC surprisingly, has been very creative on developing new products that reduce premiums. They have changed plan designs, networks and even added gate keeper plans, with the goal of controlling cost. They have established that a split co pay is now acceptable to most insure. This is where you have a lower co pay for general doctors, then a much higher co pay for specialists. This is to create consumerism. A specialist may cost $330 for a visit and general doctor may cost $90. So UHC would rather pay for the general office visit. The next change they have made is co-insurance. They have created some plans with 50% co-insurance after the deductible has been met. The insured will hit the out of pocket max much faster. Another surprising move from UHC was the establishment of the EPO network. This type of network is a hybrid of a PPO & HMO. It has national provider access but no coverage out of network. Gate Keeper policies, where the insured must choose a doctor for all of their care. That doctor must be involved with all care provided or it will not be covered. UHC also has changed their RX co pays significantly. It appears that they are running a three tier co pay system, the reality is they are running a six. They have increased cost to the insured, on drugs that cost more. All of these cost cutting measures add up for both UHC and small groups. These have led to lower premiums under the ACA but they have shifted more cost onto the insured.

The small group plans have stabilized with UHC. Anthem has not pulled the trigger on the new plans under the ACA. Anthem could come out with a new product line up that is very different than what they are offering small group now.

There is one segment of Indiana small group that is very unstable and that is grandmothered policies. These are policies that were sold prior to the ACA going active. The Federal government and the State of Indiana have agreed to allow these plans to be in place until Dec.31st of 2017. The health insurance companies and many so called experts, do not know what will happen when these plans are no longer terminated. Will these small Indiana companies accept a 44% rate increase under a ACA plan? The answer is NO, they will not. These business owners will look for alternative solutions. They will contact a broker like myself, Nefouse & Associates, INC, and we will provide that solutions to lessen the blow of the ACA.

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