U.S. 2 big insurance breakups on Valentine’s Day

It was a rough day for the already-roiled U.S. health insurance market: One giant merger was abandoned, another is threatened by infighting, and a major insurer announced it will stop selling coverage on public exchanges in 11 states.

Both merger deals had already been rejected by federal regulators and judges, but the companies were considering appeals to those decisions. Now they both appear to be off.

Aetna said it was abandoning its planned $34 billion purchase of Medicare Advantage provider Humana early Tuesday. Then, later in the day, Cigna said it is suing Anthem to kill a $48 billion acquisition bid.

The deals were conceived as a way to help the insurers increase their enrollment and cut down on expenses in part so they could improve their performances on the Affordable Care Act’s public insurance exchanges. Big insurers have been hit with substantial losses from the exchanges, even though they represent a relatively small part of their overall business. Many have already cut back their offerings, and that has slashed customer choices in markets around the country.

The collapse of one deal and the uncertain future of the other could hurt shoppers on the exchanges next year by leaving them with even fewer options and potentially higher prices. Humana told investors late Tuesday that it was abandoning it exchanges in all 11 of its states as of the beginning of next year.

Humana, based in Louisville, Kentucky, was the only insurer on exchanges in 16 Tennessee counties, according to data compiled at the start of the 2017 open enrollment period by the Associated Press and health care consulting firm Avalere. That means customers in those counties may have no way to buy coverage with help from government tax credits next year unless another insurer decides to enter those markets.

Every exchange in the U.S. had at least one insurer selling coverage on it for 2017, according to Larry Levitt of the nonprofit Kaiser Family Foundation, which studies health care issues.

Morningstar insurance analyst Vishnu Lekraj said it’s possible all the four insurers involved in the deals could leave the exchanges.

Aetna Chairman and CEO Mark Bertolini raised that possibility months ago. He said that if his company’s planned, was blocked, “we believe it is very likely that we would need to leave the public exchange business entirely,” according to court documents filed in that case.

Aetna, based in Hartford, Connecticut, says it lost $450 million last year on ACA-compliant coverage, while the company booked an overall profit of $2.27 billion. Its loss on ACA-compliant business was $100 million more than it expected.

Bertolini said recently that his company would announce by April 1 whether it will remain in any of its exchanges. “We’re looking at everything,” he said.

Government and industry officials have said President Donald Trump’s administration and congressional Republicans are weighing measures to stabilize the wobbly exchanges. Insurers have been pushing them to act soon.

“The clock is definitely ticking for the Trump administration to provide some clarity around what the rules will be,” Levitt said.

In suing to end its tie-up, Cigna, based in Bloomfield, Connecticut, said it wants more than $13 billion in damages from its onetime-companion Anthem, the Blue Cross-Blue Shield insurer, which is based in Indianapolis.

Cigna says it is seeking a $1.85 billion termination fee from Anthem and billions more in damages for what it says were Anthem’s breaches of the merger agreement.

The insurer says the damages include the amount Cigna shareholders would have received if the merger had not failed. It noted that Anthem assumed full responsibility for litigation strategy and getting the necessary regulatory approvals, suggesting that it was Anthem’s responsibility to push the deal through.

“Cigna fulfilled all of its contractual obligations and fully cooperated with Anthem throughout the approval process,” the insurer said in a statement.

An Anthem spokeswoman says Cigna has no right to end the deal, and it remains committed to closing the transaction. The insurer had just filed on Monday paperwork to appeal the federal court ruling.

Anthem and Aetna put their acquisition bids together in 2015 and touted them as a way to grow enrollment and reap savings that they would then pass on to consumers.

US: Drivers see higher premiums after not at fault crashes

By Jennifer C. Kerr

THE ASSOCIATED PRESS

WASHINGTON _ Most drivers don’t expect to be hit with a rate hike on their auto insurance after a car accident that wasn’t their fault. But a consumer group says it happens, and it’s a problem.

The Washington-based Consumer Federation of America says it found rate hikes on annual premiums as high as $400, in some cases.

In the report released Monday, the group analyzed premium quotes in 10 cities, including New York and Chicago, from five of the nation’s largest auto insurers. The researchers found that Progressive aggressively used a not-at-fault penalty, surcharging drivers in eight of the 10 selected cities. Rates in Oklahoma City and Los Angeles did not change. Oklahoma and California prohibit not-at-fault penalties.

The group said GEICO and Farmers raised rates in some states by 10 per cent or more. Allstate had occasional penalties. State Farm was the exception, with no increases on premiums for not-at-fault accidents.

“Most people know that if they cause an accident or get a ticket they could face a premium increase, but they don’t expect to be punished if a reckless driver careens into them,” said Bob Hunter, CFA’s director of insurance and the former insurance commissioner of Texas.

In response, the Insurance Information Institute said the underwriting of a new auto insurance policy requires the collection of much more information beyond what CFA gathered from the auto insurers’ websites.

Loretta Worters, vice-president of communications at the industry trade group, says it also is rarely clear-cut as to who the at-fault party is after a collision. But she said one reason rates may rise for the not-at-fault driver is subrogation when an insurer, after paying a loss, seeks to recover money from the at-fault driver’s insurer.

Neil Alldredge, a senior vice-president at the National Association of Mutual Insurance Companies, says the report “only underscores the fact that insurance rates can vary widely from company to company, based on how different companies may weigh the many different factors that are considered in determining rates.”

Among the cities tested, drivers in New York City and Baltimore paid out the most for doing nothing wrong, the consumer group said. In Baltimore, premiums increased more than $250 and in New York City, it was about $400. In Chicago and Kansas City, the average increase was about $100.

The federation’s report found that people with moderate incomes often saw bigger premium increases than upper-income people. That seemed to mirror average premiums in the report even for people with clean driving records and no accidents, with middle-income people generally seeing higher premium rates than those people with bigger incomes.

The consumer group called the five biggest auto insurers and asked for quotes for two 30-year-old female drivers, living at the same address in the different cities, licensed for 14 years and driving a 2006 Toyota Camry with 10,000 miles. One woman had a master’s degree and was a home owner. The other woman had a high school diploma and rented her home.

The report found drivers with higher incomes, on average, paid $78 more after a no-fault accident. Moderate-incomes drivers paid $208 more after an accident in which they were not to blame.

Republican administration weighs health insurance ‘stabilization’

Worried about the nearly 20 million people who buy their own health insurance policies, the Republican administration and congressional Republicans are weighing how to stabilize a wobbly market, government and industry officials say.

The goal is to soothe jittery insurance companies that may bolt next year, while reassuring consumers anxious about the future. That could also buy time for more ambitious GOP attempts to rework the health care law.

Some of the changes can be carried out single-handedly by the new administration, but others may require congressional action or co-operation.

The measures would affect not just those consumers on the subsidized marketplaces under “Obamacare,” but also people purchasing directly from an insurer or through an independent agent. The two groups have become intertwined. This year’s sharp premium increases in the health law markets also hit consumers buying individual policies on the outside, but they are not eligible for financial assistance from the government.

No final decisions appear to have been made. Trump administration officials would not comment ahead of an expected Senate vote on confirming Georgia Rep. Tom Price as the new health secretary.

But a Republican congressional aide familiar with the internal discussions said the regulatory changes that the administration is considering include:

_ Tightening rules for “special enrolment periods” that allow consumers to sign-up outside of the standard open enrolment window. Insurers have complained that some people take advantage of such opportunities to get coverage when they need care and later drop out, raising costs for everyone else.

_ Loosening a provision of the Affordable Care Act that prevents insurers from charging older customers more than three times the premium for young adults. It’s unclear how this would happen, since the limitation is specified in the law. But the GOP aide said the administration might be able to find wiggle room. Before the Obama health law, insurers routinely charged older customers five times or more what younger people paid. The ACA has made insurance more affordable for older adults, but critics say that’s pricing out the young and healthy. AARP is already mobilizing to try to head off any attempt to make older customers pay more.

_ Shortening the 90-day grace period to pay premiums for consumers who get subsidized coverage. Insurers complain this makes it easier for people to game the system.

_ Shortening the current health law sign-up season, which runs about 90 days.

_ Relaxing rules on how insurers structure their networks of hospitals and doctors. Republicans tend to think those should be set by states.

The GOP aide spoke on condition of anonymity to discuss internal deliberations. Another person familiar with the administration’s thinking said the points were on target. The regulatory changes mirror requests by insurers, who argue they would help check premiums.

A White House regulatory website lists a health insurance market stabilization rule as “pending review.”

Along with the administration, congressional Republicans would have a role to play in stabilizing the markets, by stepping back from several previous efforts to block “Obamacare” financing.

Chief among them is the fate of billions in subsidies that help low- and moderate-income people cover high insurance deductibles and co-payments. More than half of the consumers in the government marketplace get these subsidies, and insurers say they are essential. House Republicans have questioned their legality.

Other financing issues involve the health care law’s complicated internal system for stabilizing premiums. It has not worked as intended, partly because of GOP efforts to deny financing to the Obama administration.

After promising to quickly shred Obama’s law and replace it with a conservative approach, Republicans seem to be slowing down and thinking things over. Every lawmaker has thousands of constituents potentially affected.

At a hearing last week, House Energy and Commerce Committee Chairman Greg Walden, R-Ore., answered critics by saying it’s “beyond the pale” to suggest that Republicans just want to cut coverage.

He said the country isn’t going back to the days when “through no fault of your own (if) you have some disease that keeps coming at you … sorry, you’re on your own and you’re destitute.

“That’s not the choice here,” said Walden. “The choice is how we get it right.”

About 12 million people have signed up for coverage this year through the health law’s subsidized markets, according to federal and state figures.

Congressional experts estimate that another 8 million buy individual policies outside the government markets. Consumers in this group get no federal subsidies, but they have also seen their premiums shoot up. Many are self-employed business people or early retirees, constituencies considered receptive to Republicans.

 

Settlement in reinsurance dispute helps offset auto claim costs

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American Family Insurance ordered to pay Missouri woman $20 million

A Missouri woman who sued American Family Insurance for retaliation and age and sex discrimination has been awarded $20 million in punitive damages.

Deborah Miller, 60, of Blue Springs, also was awarded $450,000 in actual damages on December 9, 2016 by a Jackson County jury, The Kansas City Star reported. She was removed from her manager position in a corporate restructuring but continues to be a company agent.

Ken Muth, a spokesman for American Family, based in Madison, Wisconsin, said Monday, December 12, 2016 that the company strongly disagrees with the verdict “and believe it is contrary to the facts and testimony that were presented at trial.”

“We do not illegally discriminate in any way, and there was no discrimination in this situation. We are considering our options for appeal,” Muth said.

Miller’s attorneys said they believed the jury agreed that Miller was targeted as part of a corporate effort to replace older workers with younger hires.

Dennis Egan said he thought the jury was affected by testimony that John Bosman, a former Missouri state director of the company who supervised Miller, told Miller “this will not end well” when he put her on a performance improvement plan while she was on medical leave.

Testimony in the case indicated Miller was an award-winning sales manager who produced similar or better results than her peers who were younger and mostly men.

Egan said the plaintiff’s attorneys asked the jury to send “a message of significance that would capture the attention” of the American Family headquarters.

 

Justices uphold Katrina fraud verdict against State Farm

WASHINGTON _ A unanimous Supreme Court has upheld a jury verdict that State Farm Fire and Casualty Co. committed fraud against the federal government after 2005’s Hurricane Katrina.

The justices on Tuesday rejected claims by State Farm that the whistleblower case against the insurer should have been dismissed because its existence was leaked while it was supposed to be secret.

Justice Anthony Kennedy wrote for the court in upholding an appellate ruling that there is no requirement in federal law that the lawsuit be dismissed.

Sisters Cori and Kerry Rigsby filed the fraud lawsuit on behalf of the government after they said they witnessed State Farm shifting Mississippi claims to federal flood insurance that should have been paid by private wind insurance.

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