Michael Corleone: Just when I thought I was out... they pull me back in.
It's been a busy month for me, which is why there was no Feb 15 issue of Tattler. I've been trying to spend more time and energy marketing life and disability coverage along with a several annuities that I favor, but for some unknown reason people wanting health coverage are coming out of the woodwork! Thus, I devote this issue to the Anthem rate increase and what might be behind all of this.
The job market has been tough here. I know because so many of my clients are looking for work... and I don't have many suggestions for them... at least nothing that will pay enough to live on. That said, I did come upon an opportunity for senior citizens. This is through a local company called Seniors Helping Seniors. This is a home-care company that contracts with senior citizens who go to homes of those who might have just come out of the hospital or who need some temporary care or just need some household chores done. They go to great lengths to make a good match between caregiver and patient and they charge $18 an hour with half going to the caregiver. That isn't much but if someone is on social security and/or has a pension, it's a good deal for making some extra money... and doing a good service as well. http://www.servingsacseniors.com.
In the last issue I talked about banking locally. I had lunch with some of the execs at Umpqua bank who are NOT locally owned, but they have great culture of community service. I'm still trying to find out just exactly how much and to whom they loan our deposit money to but they have not been responsive. I've asked the same question to community banks and they haven't either. There is some kind of confidentiality policy that banks have about whom they are lending OUR money to.
If you get a chance you should ask the manager of your bank what they are doing with the money you deposit with them. If you find out, do let me know.
Finally, people at this time of year are doing taxes and thinking about money matters and they always ask me for referrals to other professionals. Here are a few people I know and trust:
Ira Einhorn, CPA, Tax Prep.and bookkeeping, 916-789-1040
Mike DeFord, Tax Prep. and bookkeeping, 916-726-6150
Jerry Vereseput, CFP, Fee-only financial planning, 916-358-5635
Jennifer Corona, Stock and bond broker, 916-486-7600
Titus Garrett, Stock and bond broker, 916-437-1590
Bill Pacheco, Stock and bond broker, 916-965-1469
Everyone has different needs, different assets, and different personalities. Call me if you want me to give you an idea of who might work best for your particular situation... or call any of the above directly and see if you like them. Say "hi" for me.
-Al
(My friend Dave Fluker, an agent in Bay Area wrote most of this... I added a few things here and there.)
With the recent notifications to approximately 800,000 CA residents by Anthem Blue Cross of California, the future of individual & family health insurance coverage is looking bleak. Anthem announced a rate increase for March 1, 2010 ranging between 30-39% on many private health plans. However, they pushed it back until May 1.
I received information earlier this month that Aetna has laid off most of their agent support reps for northern California (and I supposed SoCal as well). The last time Aetna laid off people in these positions, they exited the market in California.
First a look at some "interesting" numbers and how they relate to this issue.
-California population (2009): 36,900,000 (probably 37,000,000 by now)
-California residents covered by private health plans: 2,100,000
-California residents on average uninsured: 6,000,000
-California residents covered under Group/Medicaid/Medicare: 28,800,000
Those numbers tell us a lot about what is going on. IFP (Individual & Family Plan) represents an average enrollment of 6% of the total population, and 7% of the total insured population of California. 76% of the total population is covered under an employer-sponsored health plan, Medicaid or Medicare and 93% of the total insured population is covered under an employer-sponsored health plan, Medicaid or Medicare.
Sadly, the uninsured population is nearly three times as large as those who have private health insurance.
Group plans (employer-sponsored) flourish in California. The plans are heavily mandated by benefit and also represent a true actuarial "pool" of risk. Carriers require 75% of all eligible employees to participate, thereby spreading the risk across a large and balanced company population. I have heard over the years that actuarily, group plans tend to run 20% of the employees using major benefits, 30% using some benefits and 50% using no benefits in any plan year.
While group plans will certainly experience rate increases due to health care costs, they are often minimized by mandated participation. So long as the actuaries do their job, group tends to be more stable.
Individual plans have few if any mandates and there is no participation requirement. As such, plans react to utilization of benefits and increases in health care costs on a more radical scale than employer-sponsored group plans.
Also, plan benefit levels are continuously being adjusted to keep the utilization in check. Lower deductibles give way to higher deductibles, first-dollar benefits give way to services under deductibels first, co-insurance splits continue downward (Health Net has plans 50/50),and so on.
A decade ago, then Blue Cross of California (now Anthem) had a very impressive set of PPO plans. $10, $20, $30 and $40 co-pay plans with no deductible, low out-of-pockets and 80%-90% coinsurance levels. They also covered all normal benefits including maternity. The $40 co-pay plan was so inexpensive that it became a loss-leader. The plans were retired around 2000 to make room for plans with lower co-insurance levels, deductibles and higher out-of-pockets. This trend has continued since.
The bottom line is that slowly but surely individual plans will become undesireable to consumers and carriers. Carriers will bleed money on accelerating health care costs and consumers will hate the plan designs. Every year the carriers introduce "new" plans, all of which are stripped-down from the preceeding plan designs. Carriers will continue to retire plans that are no longer profitable (like Anthem Share PPO plans and Blue Shield Spectrum PPO plans). At the rate things are going, individual plans in a few years will be completely catastrophic coverage with little or no preventive care, generic only drug benefits and deductibles in the 10-20,000 range. Oh, and you can pretty much forget about maternity on PPO plans in a few years, too.
HMOs will continue to offer richer and stronger benefits (with access restrictions), however, they will eventually price so high as to be unaffordable for many consumers.
As for the rate increase that has been in the news, Anthem might as well have painted "kick me" on the back of insurance carriers. Sheesh, guess what everyone will be harping from this point on. Couldnt those idiots have held off a little longer and let the pending bill become more dead. I guess not. Geniuses that they are
Many are assuming that Anthem wants the pending bill or some provisions of it to be dead. Everyone is working from that assumption, and it may be incorrect. I can assure you that they have looked at what they need and what every sentence of both bills would mean to them (good or bad or both). There may, in fact be some genius at work here. Change the assumption and look at it a different way.
Interestingly... if I'm Anthem, I'm shouting from the rooftops to compare our rates with those of our competitors for comparable products.
Yet Anthem, with the exception of answering Sebelius, has been strangely quiet on this issue and has taken no real position to defend itself or actions. The defense they have presented does not really mention that competitive issue, but explains loss of healthy subscribers, number of uninsured increasing, HIPAA and MediCal risk costs and, rather oddly (or perhaps not), the need for reform.
I think... the timing couldn't have been much worse.
Or, perhaps the timing couldn't have been better. Healthcare reform has been DOA for the last several weeks. Once Sen. Brown won in Mass., the reform itself left center-stage in favor of jobs, war, and other topics. It was a minor topic of "compromise and something in the future" before Anthem raised the roof. Now it is again at the forefront. Meaning it is very much back alive and breathing (albeit now a bi-partisan issue).
If we assume that Anthem and other large health carriers wanted no part of reform, then the timing would be very bad, indeed. But, if we assume that Anthem and the other large carriers know exactly what components in the healthcare reform will be of value to them, pushing it back on the table might not be a case of bad timing at all.
Now, I am pretty sure that the power-that-be at Anthem are not stupid. They don't pull the trigger on something like this without knowing all of the consequences. So it's either bad timing or a ploy to push healthcare reform back into the spotlight. At this point it is conjecture, but I don't believe that they are so mentally challenged as to incur the wrath and not defend their position.
I'm not trying to argue that if they want/need a rate increase they should not go for it but good grief have some sense of the political atmospherics last month, this month and next at a minimum
Again, change the assumption from that to one of the already-changing political atmosphere. If an insurer wanted to make sure healthcare reform did not go on the back burner, this is a good way to do it as demonstrated by the level of response.
It's all in the numbers for California (and probably translates equally across the nation).
1. Anthem insures about 800,000 on individual coverage in CA. They have about 40% of the total market. They are the largest carrier in CA yet that number is not huge considering...
2. Healthy subscribers are dropping coverage daily due to economic factors and rate increases. This leads to....
3. California has an average of 6,000,000 uninsured. That number is increasing daily with people dropping coverage (and healthy ones especially because of cost).
4. Anthem insures less the 10% of the total potential private (non group) market (about 8.5M) and there are those 6,000,000 bodies out there to pay premiums and pool risk.
5. Expanding the pool by the 6,000,000 at their current market share would increase the number of insured subscribers from 800,000 to just under 3,000,000.
6. A fully insured population (by mandate) would reduce the defaults on payments for care and allow better cost control for medical services (health care). The 6,000,000 would be reduced to a few hundred thousand maybe (like auto, it's mandated but not everyone who drives has it).
7. Better negotiated rates (what the docs receive), a much larger pool of premiums, a true balance of low and high risk subscribers could lead to better rate stability.
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