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On Tuesday, March 24, 2009, the nation’s health insurers proposed to stop their policies of charging higher premiums for sick customers, and extending coverage to all Americans regardless of whatever pre-existing health condition they may have.

The devil is in the details however.  The aforementioned is contingent upon a government mandate that all Americans purchase health insurance.  This enormous risk pool would allow all health insurers to implement the aforementioned proposal, while maintaining a profitable market according to America’s Health Insurance Plans and the Blue Cross Blue Shield Association whom represent 1,300 companies insuring more than 200 million people.

This proposal mimics the system already in place in Massachusetts where everyone is required to have health insurance.  The government provides subsidies and tax breaks for those residents who can’t afford the entirety of the plan.  Not all would be completely equal though, as insurers would still need to vary rates based on age, family size, and geography.  Additionally, discounts would be available to individuals who maintain healthier lifestyles, such as non-smokers and those who follow treatment programs precisely.

The proposal comes in response to the Obama administration’s initiative to create a government-run, national health care system.  Such a system would directly compete with private insurance companies and possibly drive such private insurers out of business according to leaders in the industry. The proposal, made at a Senate hearing, was met with a lukewarm reception by lawmakers who want to know more about the details before taking further action.  The White House did not comment on the proposal.

Granted, this is only a proposal that may or may not go anywhere, but if such a system was implemented, what would the implications be?  We encourage you to let us know what you think this means for you as agents, your customers, and the industry at large.  Would requiring everyone to have health insurance mean more business for you?  Would there still be a need for agents?  Would this change be better than a government-run program?  Are private-insurance companies just afraid of competition from the government?  As always, we’ll keep you updated on the latest developments.

This week I’d like to give all of you a summary of various news articles that have been published in the month of March thus far.  Such information can make good talking points with your clients, or be good ice-breakers for those cold calls.

Hospital prices increase: According to the Bureau of Labor Statistics, hospital prices once again increased in February by 0.9%.  This followed a January price increase of 0.8%.   The physician index climbed 3.2% for the 12-month period ended in February compared with 2.1% in the prior year period.

Americans skimp on healthcare: According to a Deloitte Consulting survey, 25% of Americans skip care when they are sick or injured, and 40% give the healthcare system a failing or barely passing grade.  94% said healthcare costs threaten their financial security, regardless of their insurance coverage or health status. 50% of uninsured said insurance was too expensive for them to purchase and 73% said they are confused about how the healthcare system works. The survey was conducted in October 2008 through a web-based survey of 4,000 adults.

No more pre-existing conditions?: On Tuesday, Sen. Jay Rockefeller, D-W.Va., and Rep. Joe Courtney, D-Conn., introduced the “Pre-existing Condition Patient Protection Act” Tuesday calling for the elimination of pre-existing condition exclusions from health insurance policies. Two conditions exampled are diabetes and heart disease.  This bill is part of President Obama’s agenda for health care reform.

Credit losses mount for life and health insurers: According to MarketWatch, life and health insurers are in need of more capital as credit losses are growing and equity markets are slumping.   Signs indicate that credit losses will reach 3.4 times the current excess capital of the sector on average, including extra capital that will be generated this year and in 2010.

Retirement assets fall in value:  According to a report released by the Spectrum Group, retirement market assets plunged 24%. The value of defined contribution and defined benefit plans decreased from $10.3 trillion in 2007 to $7.86 trillion in 2008. 

Like pork, annuities have long been misunderstood by the public and have stood in the shadow of a more prominent retirement product – mutual funds (think chicken).  However, the combination of a frail stock market, a severe recession, and millions of Americans nearing or entering retirement has created a new focus on creating guaranteed retirement income.  

Make no mistake, annuities are more difficult to fully understand than most other traditional insurance products and involve higher fees, however, the benefits often offset the higher barrier to entry. In the short term, consumers holding annuities see little to no loss during stock market downturns, especially if they have a safety rider.  Over the long term, they can have a guaranteed income stream in retirement that can be life saving. Depending on the specific product, annuities can be withdrawn without penalty in certain circumstances, such as for medical emergencies or urgent need for nursing home care. Additionally, other annuity products can pay out benefits to a holders’ beneficiary upon death similar to a final expense product.

Due to the complexity of annuities, it’s best to contract with an organization whose sole focus is on annuities.  For this reason, we have partnered with The Annuity Shoppe to offer contracting for annuities.  With more than 60 years of combined staff experience in the industry, The Annuity Shoppe continues to successfully provide agents with everything they need to be successful in the annuities market. 

As we’ve said before, enhancing the diversity of your portfolio is crucial to business development.  Adding annuities to your portfolio may seem like it may fall outside the scope of your business, but you may be surprised at how complementary a product it can be upon further research.  With more and more risk-adverse consumers (which probably describes the vast majority of your clients in these times) inquiring about this increasingly popular product, your time would be well spent exploring the possibility of offering annuities to your clients.

On February 26, 2009 President Barack Obama announced his administration’s guiding principles on overhauling the way healthcare in America is provided and funded.  As a first step toward its ultimate goal of universal healthcare coverage, the Obama administration’s first budget will cut $316 billion from Medicare over 10 years to help pay for a new $634 billion healthcare reserve fund that will be used to revamp the current system. 

The real shocker for the Medicare Advantage industry came with the announcement that the majority of the $316 billion reduction will come from reducing payments to Medicare Advantage and the introduction of a competitive bidding process. This bidding process alone is estimated to save the government $176 billion over 10 years.  Soon after the announcement, Medicare stocks sank, with the Morgan Stanley Health Care Payors Index declining by more than 10%.  Healthcare provider and manufacturer indexes were down 6.7% and 4.4% respectively, according to modernhealthcare.com.  

In the first month of 2009, over 200 Medicare Advantage providers increased their premiums by 13% on average, which is more than five times 2008 increases, according to Avalere Health, Bloomberg/Philadelphia Inquirer reports. This increase was in anticipation of last Thursday’s announcement, so it will be interesting to see how much further  Medicare Advantage premiums will increase with the market’s more dire outlook.

So what does this mean for you and your clients?  At this point, it’s anyone’s guess, but for us it’s a reaffirmation of the need to have a diverse portfolio that includes a range of products spearheaded by Medicare Supplement products.  Presumably, as Medicare Advantage premiums increase, your clients will want to explore alternatives, so make sure you can offer those alternatives or risk losing them.  We'll keep you updated on continuing, major developments.