BretPadilla.com

October 18, 2015

Hello Everyone,

I hope this update finds you and your family all well.  First off, I would like to thank you for allowing me to have assisted you with your health insurance this last year.  I hope the plan that we worked on together helped you save the most overall money out of pocket for your healthcare in 2015.  I appreciate all of you trusting me to advise you, and also for a number of the referrals that I’ve received from many of you as well.

Open Enrollment for 2016 will begin on November 1.  As of right now, most of the companies in the Colorado marketplace have yet to release the final rates and plan structures that will allow us to begin looking for an appropriate plan.  All companies will certainly have rates and plans released on November 1, however it is possible that some of them will release a bit early to allow the chance to begin preparing.  Since plans are not required to be out until November 1, it will probably be best to get a full picture of how the companies are competing with one another, as some may decide to try to “buy” the marketplace with lower offerings than others this year.

As nearly everyone knows, in 2015 CO HealthOP was the company that essentially “bought” the market.  They priced their plans to be the cheapest and overall best value in Colorado, which is why they gained an incredible marketshare in CO and 83,000+ members in their plan.

All but a handful of you are on the CO HealthOP plans currently, and I’m sure most of you know that the CO Division of Insurance has decertified the company for 2016.  Everyone on CO HealthOP will have to find a new plan for 2016.  CO HealthOP WILL cover you through the end of 2015 and all claims will be paid.  They currently have the funds in order to do this, and according to them, had the capital to be able to pay claims in 2016 as well.  The reasons for CO HealthOP collapsing and being decertified are due to the federal government notifying them that they would only be receiving 12.6% of the money they were expecting for their “risk-corridor” payment.  This is the fund that companies were paying into to reserve for the possibility of high-risk, expensive members joining any plan.  With the implementation of the Affordable Care Act, the government knew that it may be difficult for companies to plan for their costs the first few years.  The risk-corridor fund was designed to pay back to companies money to help cover the cost of expensive members.  Unfortunately for CO HealthOP, being a smaller insurer and a startup, only receiving 12.6% of the money they were expecting dropped them below the levels that the Division of Insurance requires to allow them to do business in Colorado.  I met with the company in their office on October 13th, and they believed that they had several solutions for investments to meet the correct standards, but the State did not want to wait too long, as open enrollment was approaching.  At the bottom of this newsletter, I’ve attached further explanations and points of view on this from CO HealthOP themselves, as well as from Connect For Health CO in case you want to read more about this situation and haven’t been able to do so yet.

With that being said, CO HealthOP had priced their plans very low for 2015, and everyone was able to benefit from lower cost insurance this year as they were aggressively trying to gain a good foothold in the CO market.  Unfortunately, this will mean that for 2016 everyone will likely see a fairly increased premium for similar coverages.  CO HealthOP themselves were planning to increase premiums roughly 20+% to be more in line with the industry, but still on the lower, more competitive end.  Networks are also very likely to be somewhat narrower as companies are settling in to their cost structures under the rules of the Affordable Care Act.

In order to start preparing for a new 2016 policy, we will have until December 15 to get something effective for January 1.  I will do my best to work with every single one of you to find you the most affordable option for you and your family.  The first week of November it will take me some time to sift through all of the offerings in the marketplace and get a good sense of how the companies have structured their coverages and premiums.  The other consideration that is important for everyone is which doctors you go to.  If you can respond back in an email to me and let me know again which doctors you currently see, that would be very helpful to be able to start preparing.  Also, please put down if the doctor is a “deal-breaker” doctor, i.e. they’re someone you absolutely need/want to keep, and those that you are okay switching from if it saves you money by going with another insurance option.  We may have to make more compromises this next year, but we will have to see once we can get into the weeds and details of the policies.  Any other information as far as number of expected health visits, and/or any surgeries or concerns on the horizon would be very helpful to help structure the coverage as well.  Again, my #1 goal for everyone of my clients is to save you the most amount of money on your health plan and visits for the year.  I am a free service to you all, as no health insurance broker has the ability to change the prices of the policies (much different from say a mortgage broker).  It all comes down to who you want advising you.

Again, below are the letters in regards to CO HealthOP if you would like to read more about their situation.  I hope everyone is well, and I look forward to hearing from you and working with you the next couple of months to get you covered for 2016.

Best Regards,

Bret A. Padilla

Message from Julia Hutchins, CEO of CO HealthOP

Dear Member,

It is with a heavy heart that I write to you today. This morning, the Colorado Division of Insurance (DOI) announced Colorado HealthOP will not be selling plans through the Connect for Health Colorado marketplace.

Please be assured that, as a Colorado HealthOP member, your coverage will remain in effect through December 31, 2015, so long as you continue to pay premiums. In two weeks, on November 1, 2015, the Connect for Health Colorado marketplace will open and you will have the opportunity to find another health insurance provider that will begin coverage for you on January 1, 2016.

Needless to say, we are astonished and disappointed by the DOI’s decision. We believe it is both irresponsible and premature.

Colorado HealthOP is a profitable start-up insurance company that is in a strong financial position and, for two years, has served the critical needs of Coloradans like you by enhancing competition in the Colorado insurance market, driving down prices in the state health insurance marketplace and offering new, innovative choices to our more than 80,000 members throughout Colorado.

By choosing this course of action, the DOI has let local and national politics hurt Coloradans’ access to low-cost healthcare options and assessed Colorado taxpayers with significant avoidable costs. You can learn more about the background on this decision here.

For this reason, Colorado HealthOP will continue our fight, pursuing all possible remedies, to serve our members during this transition. To ensure the CO-OP’s values are preserved and not eclipsed by financial interests, Colorado HealthOP’s Board of Directors demands that the state allow a Board-appointed independent consumer protection ombudsman to assist and shepherd our members through the shut down transition in an equitable manner. This includes the third-party review of all claim denials.

I would like to thank each and every one of you for believing in the CO-OP model and taking part in our mission to make healthcare more accessible, affordable and equitable for all Coloradans. It has truly been a pleasure to serve you.

Thank you for choosing us,

Julia Hutchins, CEO Colorado HealthOP

Communication from Connect For Health CO regarding CO HealthOP

NEWS RELEASE                                      For Immediate Release: October 16, 2015

                                  Division of Insurance moves to protect Colorado consumers
                                             Colorado HealthOP not available for 2016

DENVER – Today, the Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA), took action against the Colorado Health Insurance Cooperative, more commonly known as the Colorado HealthOP, preventing it from selling insurance for 2016 on the state’s health exchange, Connect for Health Colorado.  Colorado consumers will not be able to buy new HealthOP coverage or renew existing plans for 2016, for individuals or small groups, on Connect for Health Colorado.  This move comes in time to ensure that HealthOP members can enroll in new plans during the upcoming open enrollment without a disruption in coverage.

The DOI took this action as the financial viability of the HealthOP came into question after learning it would receive considerably less money than expected from a federal, risk-based reimbursement program know as “risk corridor.” Earlier this month, the Centers for Medicaid and Medicare (CMS), announced it would only reimburse the nation’s health insurers 12.6% of what they were entitled under the program – only $362 million out of $2.9 billion promised.  Colorado HealthOP was expecting around $16.2 million this year from the risk corridor payments, but instead will only receive about $2 million.

Because of the shortfall in funds, the HealthOP does not meet the State’s minimum capital and surplus requirements.  The State requires insurance companies to maintain a certain level of capital and surplus to act as a rainy day fund should the company have a number of very sick people with very high cost claims.  Without enough money in that rainy day fund, a company would not be able to pay the claims for its members.  The DOI has had the HealthOP under supervision since February, during which time it continued to meet the capital and surplus requirements.  However, not receiving the risk corridor payment means the Colorado HealthOP’s rainy day fund will be completely wiped out, and is in fact expected to be in the negative by $34 million by the end of the year.

“Our decision is a direct result of this shortfall by CMS, and I sympathize with the HealthOP, but the Division has requirements and it has to protect consumers,” said Insurance Commissioner Marguerite Salazar.  “It is a key function of the DOI to make sure that insurance carriers are financially stable enough to pay the claims of their policyholders.  While Colorado HealthOP can continue to pay claims for the rest of 2015, we cannot allow it to sell or renew policies on the exchange for 2016.”

Commissioner Salazar added, “It is truly unfortunate, but the Division had to act now, before open enrollment gets started November 1st.  To delay any longer would undermine the open enrollment process, impacting the entire health insurance market in Colorado and negatively impacting Colorado consumers.  And it would have been even more costly to consumers if this action had to take place once 2016 started.”

What does this mean for Colorado HealthOP members?

As of September 15, the HealthOP had 82,785 members, with 79,877 under individual policies, while 2,908 are covered under small group policies.  Current individual and small group Colorado HealthOP policyholders will continue to be covered until the end of their policies, as long as they continue to pay their premiums.  But for coverage in 2016, HealthOP members will need to choose plans from other insurance carriers.  Members with individual policies must choose another carrier during the upcoming open enrollment for individuals, Nov. 1 – Jan. 31.  Consumers can select coverage through Connect for Health Colorado, or off-exchange, but are reminded that tax credits are only available when purchasing coverage through Connect for Health.

Consumers should know that under Colorado law, they will NOT be responsible for payments to providers that should be paid by the HealthOP, as the company will continue to pay claims for current members.   If for some reason, the HealthOP is unable to pay claims, the Colorado Life & Health Insurance Protection Association, a nonprofit organization that assists Colorado residents with health insurance policies by insurance companies in financial difficulties, would step in and pay claims.  It is for situations such as this that the Association was created.

A representative of the association, Chris Chandler, said, “If called upon, the Life and Health Insurance Protection Association is prepared to provide a safety net for members and ensure the payment of claims consistent with its statutory mission of protecting policyholders.”

Colorado HealthOP members must still pay their premiums for their coverage to remain effective.  They will still be required to pay for their share of charges such as deductibles, co-payments and co-insurance, as required by their plans.

What does this mean for the 2016 open enrollment?

For the 2016 open enrollment for individual health insurance, Colorado HealthOP plans will not be available to buy or renew through Connect for Health Colorado.  HealthOP plans will also not be available for small employers to buy or renew through Connect for Health’s SHOP program

Removing Colorado HealthOP from the exchange’s 2016 offerings has an impact on all of the information and calculations for open enrollment.  This will also impact the advance premium tax credits (APTC) that help make insurance more affordable for many.  APTC is based upon the second-lowest Silver plan in an area, and since the Colorado HealthOP was the carrier with that second-lowest Silver premium in many areas throughout the state, this decision will impact those calculations.  The Division is revising its figures for the number of carriers and plans available and the statewide and geographic area average premiums.

The approved plans and premiums for 2016 should be available from the DOI in the coming days.

As with every open enrollment, Colorado consumers should review all of their health insurance options, and are free to explore all of the plans available in their area to determine the best fit for their health and financial needs.  While Colorado consumers generally will be able decide between staying with their current plan or moving to a different plan, Colorado HealthOP members MUST choose a plan from a different insurance company for 2016.

As many in our country’s Baby Boom Generation are now starting to enter or get near retirement, it is becoming more well known that perhaps delaying their Social Security benefits up to age 70 could be their best and most financially desired goal.  As this guide How To Maximize Your Social Security Benefits explains, if you begin taking your benefits at age 62, your benefits will be permanently reduced.  But if you can delay your benefits past age 66, your benefits will grow 8% per year until you reach age 70.  I don’t know about you, but I don’t know of too many investments, that payout for the rest of your life, that grow at a guaranteed rate of 8% per year – plus a cost of living increase every year!  Since most people are living longer these days, it’s important to find some kind of income that is going to be lifetime.  One option for lifetime income are Annuities, however, we will set those aside for now since the main focus here is maximizing Social Security.

So What If You Want to Retire Before Age 70?

The reason for wanting to delay your Social Security benefits is clear for the guaranteed 8% increase in benefits, but how do you get there?  One powerful strategy in finding enough income to make it from your mid-60s to age 70 is evaluating whether or not you can access Spousal Benefits from Social Security.  As the previously linked guide explains, there are a few ways that someone can access a spousal benefit Social Security check every month, and continue to DELAY their own benefits so that they grow that 8% per year.  Another option for income in your mid-60s could also be an immediate annuity, which will provide a guaranteed income stream and protect your hard-earned savings from market volatility.

But What are Some Risks To Delaying Your Social Security Benefits?

Now what if an older spouse filed for their benefits and delayed them at age 66, but then unfortunately passed away at age 69?  They clearly did not receive a Social Security check and income from age 66 to 69.  Both the younger and older spouse received very little to NO benefit from delaying the benefits because they sadly did not make it to the point to be able to draw a check and maximize their benefits for both of them – AND they lost out on many thousands of dollars that could have been used or saved during those years.  Or if they passed away at age 71, then they only received their check and increased amount for 1 year.  Again, an overall loss of money that could have been saved for the surviving spouse.

What is the answer to this risk?  One strategy is funding a fixed-indexed universal life policy leading up to retirement for 3 reasons.  1. The policy will build cash-value over the time it is funded.  If you need income in your mid-60s, you can take a policy loan from your cash-value which will provide the necessary income to make it to age 70.  2. If one spouse who is delaying their benefits happens to pass away during this time period, then the life insurance policy will pay out the cash-value and the policy face amount to the surviving spouse.  This ELIMINATES the risk of “losing out” on the benefits that were not received from a deceased spouse who had delayed their benefits but passed away before they could receive a check, as the life insurance policy would serve as necessary and important income to the surviving spouse.  3. Both the policy loans that can be drawn from the cash-value in your late 60s while delaying Social Security benefits, as well as the life insurance payout to a surviving spouse are both TAX FREE.  No taxes are owed on this money which is an incredibly powerful feature that will ensure maximizing income to either spouse.

It is important to note that this life-insurance strategy is something that is difficult to employ once you make it close to retirement, as funding the policy for some time helps build the cash-value to a level that allows it to maximize for policy loans.  Also, life insurance is something that has to be qualified for – which is more difficult and more expensive the older someone gets.  This is a strategy best served for someone who has 10 or so years, give or take, leading up to retirement.  Usually your mid to late 50s are the highest earning years for most people, and this helps people be able to start getting their finances and strategy together leading up to retirement.

For the person who is already very close to retirement, again, an immediate-annuity may be the best option and source for guaranteed income, and to ensure that the money they need for retirement isn’t exposed to stock market losses.  Call or email me and we can discuss which strategy may be most appropriate for your situation.