Is Medical Mutual of Ohio Losing or Winning?

Medical Mutual of Ohio, one of the largest insurers in the state, announced that with the 2017 open enrollment they will discontinue to offer PPO plans both on and off exchange. This has significant ramifications to Ohio's Obamacare marketplace with the biggest impact being that eliminating these plans reduces the counties that Medical Mutual will participate in from all 88 down to 31.

This is not what Medical Mutual wants to do, but is necessary to continue selling individual plans.

Overall this decision will eliminate insurance to 25% of their membership and cause an unknown (guessing very large) percentage of their membership to have to switch from a PPO plan to an HMO or POS plan. The POS plans will only be available in the Cleveland market while all other regions will be migrated to HMO plans.

Beside losing plans, members will also lose access to providers and facilities. At the top of the list of facilities no longer available is Cleveland Clinic. Unless you fall in one of the nine counties surrounding Cleveland (POS plans) you are out of luck. What if you want the James Cancer Center at OSU? Not if you are outside of Columbus. How about Bowling Green, Ohio's Wood County hospital? Sorry, they aren't even in the HMO networks available. The list goes on and on and we haven't even mentioned the potential loss of primary doctors and specialists.

The decision came down to survival. For 2014 and 2015 Medical Mutual lost a combined $175 million. Even with reinsurance payments of $125 million it still leaves them $50 million in the hole. Obamacare supporters and insurers expected to see claims slow down and the market to stabilize. Neither of these things have happened. Add to the mix reinsurance is ending, and insurers like Medical Mutual see that it is impossible for them to continue the same strategy in the marketplace.

The new strategy is simple. Limiting network choice and limiting where to do business is bound to reduce the unhealthy risk while also eliminating providers who are unwilling to lower their reimbursement rates.

Instead of Medical Mutual rolling out 45% increases to members they will send them cancellation notices. Those in the 31 counties where HMO's will be offered will see renewals that map them to new plans. These renewals will vary based on rating regions. For those going from PPO to POS (Cleveland area) they will see increases in the low teens. Those already in HMO products will see increases in single digits. The winners will be those going from PPO to HMO where significant rate decreases will be given.

It's the financial winners that will be the focal point. Obamacare supporters will point to the rate reductions as a product of the law working. Never mind the fact that it is only "working" by limiting the providers of care that are essential to the health of those Obamacare was supposed to protect the most.

If you like your plan: RIP

With all the news today about Aetna bailing on most on-Exchange individual health insurance business, this news is falling under the radar:

"Important Changes to Medical Mutual’s 2017 Individual Products

While Medical Mutual is firmly committed to Ohio and the Individual ACA market both on and off exchange, it is necessary for us to make changes to our 2017 individual health insurance products."

The regional carrier goes on to announce that, effective with the 2017 plan year, they're completely abandoning 57 of Ohio's 88 counties (almost 2/3's) altogether, and "mapping most of those remaining from PPO plans to the stricter HMO model.

The good news (such as it is) is that grandmothered and grandfathered plans aren't subject to these changes.

Co-blogger Patrick wonders:

1. How many people do they have covered on the exchange and off the exchange?
2. How many people will lose coverage?
3. How many people will lose their PPO plan but be able to migrate over to an HMO option?

MedMutual is hosting another webinar later this month, perhaps we'll have those answers then.

But remember:

UPDATE: Pat has more details on this breaking story.

Is Sharing (Really) Caring?

I was recently invited to represent a so-called "health care sharing ministry." These plans (about which Bob has written, most recently here) are considered ACA-"exempted" plans, meaning that although they don't meet the stringent ACA coverage requirements, they are nonetheless deemed "kosher" [ed: Heh] for ObamaTax purposes.

These plans essentially rely on the kindness of others to help folks pay for care. What's different (and somewhat appealing) with this one, offered by Altrua Healthshare is that it seems more structured than the ones I've seen previously, and from an agent's point of view, more attractive:

• Broad Network
• EXEMPT from Affordable Care Act
• Purchase all year, not just during open enrollment
• Very affordable memberships
• Available in all 50 states
• Pays great commissions

That last is important, as carriers continue withholding commissions, especially for "off-season" enrollments.

There are several things I do like about this particular iteration: first, they are non-denominational, meaning that they are open to different "flavors" of Christianity. Of course, this leaves folks like yours truly out in the cold as far as actually joining, but it may be attractive to my Christian clients (which most are, of course).

I also like that they set things up to mirror ACA metallic tier plans: Gold, Silver, Bronze. And it seems affordable, with rates for even "Gold" level plans available in the low $200's (per month). This is at least partially due to the fact that it's medically underwritten:

"Some individuals may not be eligible or have a membership limitation due to certain past or present medical conditions."

Of course, I have some significant reservations, the most important of which is that this is not insurance (and to be fair, they make this perfectly clear up front):

"Altrua HealthShare members understand that Altrua HealthShare is NOT an insurance company and each member remains self-pay" [emphasis in original]

This presents a problem for me as an agent: if I recommend it, and the client blows past the $1 million lifetime maximum, or the plan fails to pay as set forth, then it seems to me that I've opened myself up to quite the E&O (Errors and Omissions) claim. It's rather like the argument about going "bare" in that I walk a very thin line between understanding a client's financial situation and recommending a potentially risky alternative.

A couple other thoughts from Bob:

First, the Idaho DOI shut down Altrua in the Gem State in 2011. It's not clear to me whether that's been resolved [ed: although the fact that it's touted as being available in "all 50 states" certainly implies that].

Second, he says "I like the concept, but hate the upside risk to client and and agent. I've suggested them in the past with caveats. A few have enrolled in a plan but none have really tested one yet."

And there's this:

"All low price insurance (and non-insurance) is great until you really need it."

Indeed.

[Hat Tip: Cornerstone]

Interesting UL "News"

I've long been a critic of first and second generation Universal Life plans. Which is not to say that they didn't have a role to play, just that I think they required more "hands-on" attention by insureds than they were really prepared (or encouraged) to take on.

One of the biggest challenges to older plans is that they often become "upside-down;" that is, the internal costs far exceed the premium and interest credited, and they quickly become very expensive. Compounding this are IRS rules that effectively quash any hope of recovery by limiting premiums to a level where the policy just can't sustain itself.

The problem is that, if one doesn't really "goose" the cash value the first few years, then by the time the problem (insufficient cash value) becomes clear, it's too late to correct.

Or so I thought.

Turns out that although carriers can't illustrate level premiums sufficient to carry the policy forward, there's a stipulation in the tax code that if a policy violates IRS guidelines, once the cash value has been drained you can pay the premium needed to cover the monthly cost of insurance deductions/expenses. You just can't build a significant amount of cash value.  So, you'd need to increase the premium each year as the cost of insurance deductions increase.

[ed: Link to relevant code is here, scroll down to 7702 f 6]

So, problem solved? Eh, to the extent that one can continue to pump cash into a quickly expiring insurance policy. The question then becomes whether that's really a good idea. Or it may be that this is the time to seriously consider selling the policy. Still, it's always nice to have options.

[Hat Tip: FoIB Sara S]

$plitting Dollars

It's hard to believe, but in over 11 years of blogging, we've never talked about the 'split dollar' life insurance funding technique:

"A split dollar plan allows an executive to obtain life insurance coverage using employer funds. The investment by your business in the plan is fully secured. If the insured employee dies or his or her employment is terminated, your business is reimbursed from the policy proceeds for its payment of premiums."

Now, why would an employer want to offer this? Well, it's a way to reward valuable employees (executives, key supervisors and the like) in a way that, unlike most benefits, doesn't require offering the same deal to everyone. Basically, the two parties (employer and employee) split the cost of coverage using whatever permanent type of coverage is appropriate (Universal or whole Life, for example).

It's an economical way to help a favored employee afford more long term coverage, and acts as "golden handcuffs" to entice him to stay. The concept itself has been used successfully for many years, and is generally well-accepted by the IRS.

But one can "up the ante" a bit by adding an "Inter-Generational" twist. These arrangements are generally family-directed. For example:

An elderly and permanently incapacitated mother acquired, on a lump-sum basis, life insurance on each of her three sons. The Tax Court was asked if this "would be deemed a taxable gift to the extent that the premium payment exceeds the value of current life insurance protection."

That is, since the death benefit of the insurance policies would always be greater than the (one-time) premium paid, would that premium be taxable? The Court actually ended up ruling that it wouldn't.

Now, why is this interesting to those of us who don't have extremely wealthy (and desperately ill) parents? Because it reaffirms the basic value of the split dollar concept itself and, who knows, perhaps you'll one day be that wealthy orderly parent.

Not to mention that emphasizing the need for well-thought-out estate planning.

A Philosophical Conundrum:

A month ago, I blogged on a client whose premium was jumping from about $700 a month to $1,000. One of the options we discussed was "going bare;" that is, declining to buy any insurance. Now, he could have potentially then become subject to the ObamaTax, but even that is a small fraction of what that increase represents.

He ultimately chose to keep his existing coverage (since he'd already met his annual deductible and was anticipating some additional expenses), but our discussion really brought me up short.

It wasn't that long ago that I castigated the subject of a newspaper article for making the choice to roll the dice by deciding not to be insured.

So what changed?

Everything, really: under the UnAfforable Care Act, it seems to me that choosing not to buy insurance is a rational choice. Although I would never advise going this route (cf: E&O coverage) there are certainly circumstances in which I don't argue very forcefully on its behalf.

Let's take Max: his current plan comes with a (low, by today's standards) deductible, after which covered expenses are paid at 100%. If renewal wasn't an option, he would likely be looking at a $4,000 deductible plan with a monthly premium of $852. Which means paying out over $14,000 (on an annual basis) before the insurance paid penny one.

Well, that's not quite true, either: the first dollar benefits include an annual checkup, which is worth some small fraction of that $14 large. Oh, and birth control and maternity, as well. For a 64 year old guy.

He'd save about $700 in ObamaTax penalties, as well.

But you see where this is going, right? It's absolutely a reasonable, rational choice to take a pass on an ObamaPlan altogether. And I hate that I not only see this, but (reluctantly, to be sure) agree with it.

/sigh

ObamaCare #Winning

It will come as no surprise to those who've been paying attention that the (Un)Affordable Care Act has been an unmitigated disaster. But it may surprise some to learn of the scope of said disaster:

"While clear evidence that the law was expanding coverage, the soaring enrollment numbers have created a fiscal nightmare for insurers which, in turn, has serious consequences for customers."

I might take issue with the assertion that more folks are insured since the train-wreck passed, but that's for another post. The key is the make-up of those newly-insured:

"A majority of new enrollees are considered high risk, meaning insurers will have to spend more money on people in poor health and requiring expensive  care."

This just makes sense, since when one is in dire need of health care it's human nature to seek out ways to help pay for that care. The problem is that there's no truly effective way to cushion that by enticing healthy folks to play along, except to keep moving inexorably toward a nationalized, government-run system (aka Single Payer).

Which works out so well.