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IN FRONT

Dem Hopefuls Fine-Tune Health Care Ideas As 2020 Draws Closer

Will “Medicare for All” get rid of private health insurance once and for all? How will Americans pay for Medicare for All?

The Democratic presidential candidates are refining their positions on the issues as each political hopeful tries to stand out. Health care is one of those issues where some of the candidates are clarifying their views.

Sen. Kamala Harris, D-Calif., originally had come out in favor of a Medicare for All plan that abolished private health insurance. Then she stepped back from that position to propose that Americans could opt for Medicare Advantage coverage from a private insurer. Her plan would allow for a 10-year transition period while all Americans would opt into either Medicare or Medicare Advantage. Private insurance plans could participate, but would have their own set of rules to follow.

More recently, Harris announced how she would pay for the plan. She proposes a 0.2% tax on Wall Street stock trades, a 0.1% tax on bond trades and a 0.002% tax on derivative transaction. She said she also would tax offshore corporate income the same way domestic corporate income is taxed.

Harris said she would not raise taxes on households making less than $100,000 a year to pay for her health care plan. This is where she parts ways from another Medicare for All proponent, Sen. Bernie Sanders, I-Vt.

Sanders still wants to see private health insurance go away, and he wants the middle class to pay more taxes for a government-run health insurance system.

Income-Based Premium

In a white paper he issued earlier this year, Sanders proposed a 4% “income-based premium” on household income above $29,000, a 7.5% “income-based premium” paid by employers that exempts the first $2 million in payroll, a wealth tax and an expanded estate tax.

Sen. Elizabeth Warren, D-Mass., also favors Medicare for All, but hasn’t specified who will pick up the tab for it. She has stated publicly that she believes billionaires and large corporations should pay more in taxes to fund her health care proposals.

Meanwhile, another front-runner among the Democrats, former Vice President Joe Biden, is not ready to let go of private health insurance. Biden’s plan would establish a public option while allowing private, employer-based coverage to remain. Biden estimates that cost of this would be about $750 billion over 10 years, and would be funded through increased taxes on high earners.

Would Americans be OK with paying higher taxes if it meant they would pay less out of pocket for health care?

The Kaiser Family Foundation conducted two surveys on that issue — one in January and one in July. The January survey found that overall support for Medicare for All drops when people hear that it would require most Americans to pay more in taxes. At the same time, more people are favorable toward the plan when they are told it would eliminate premiums and reduce out-of-pocket health care costs.

But in July, Democrats and Democratic-leaning independents told Kaiser they would rather see lawmakers build on the Affordable Care Act instead of replacing it with Medicare for All.  Similarly, a Monmouth University survey released found that a majority of likely Iowa Democratic caucus-goers prefer a health plan where people can opt-in to Medicare over Medicare for All.

Regulators Focus In On LTCi

Long-term care insurance pricing remains incredibly difficult to stabilize and state insurance regulators are making it their top 2019 priority.

The Long-Term Care Insurance Task Force formed in April with two main goals, said Scott White, Virginia insurance commissioner: to develop a consistent, national approach for reviewing LTC rate requests, and to make sure consumers have options when presented with costly rate increases.

Thirty-six states joined the task force, which met last month during the National Association of Insurance Commissioners’ summer meeting in New York City.

“It’s very clear the members are quite serious about coming up with meaningful solutions,” White said.

Work groups have been formed focusing on six topics, he added: how states can coordinate multi-state rate reviews; state guaranty fund coverage cap issues; LTC benefits options offered consumers facing rate hikes; evaluation of insurer reserves; non-actuarial variances affecting how states respond to LTC rate hike requests; and additional data gathering for the task force.

But clearly the main focus of the task force is rate reviews. Two approaches are on the table, White said: amending the Interstate Insurance Product Regulation Compact, or developing a rate-review model law.

A popular product in the 1990s, LTCi was badly underpriced. Many insurers sought, and continue to seek, significant rate hikes to stabilize their books.

For example, Blue Cross Blue Shield of Florida policyholders have been notified by mail in recent weeks that annual premiums for their coverage will increase by an average of 94 percent through 2021.

The company originally requested a 280 percent hike but state regulators refused to grant that, telling the company the request was not “adequately demonstrated to be reasonable in relation to the benefits provided,” according to a consent order by the state Office of Insurance Regulation.

Birny Birnbaum, executive director of the Center for Economic Justice, urged the task force to hold insurers and their investors accountable for price increases.

“When an investor purchases a share of an insurance company, they understand that it’s not a risk-free investment,” Birnbaum said. “It’s been well-documented that insurers mispriced their products. The mispriced products sold briskly during the first two decades.”

Annuity Model Law

The Annuity Suitability Working Group also met in New York and chairwoman Jillian Froment vowed to complete its annuity sales model law by the NAIC fall meeting in December.

The group met in the state where a tough best-interest standard took effect Aug. 1 for the sale of annuities — a fact not lost on some members. New York regulators are pushing colleagues to adopt its standard, which also covers life insurance, as the national model.

But there is plenty of resistance, which isn’t likely to go away, Froment acknowledged.

“What best interest means to us as a working group does not mean that every state around the table will support that,” she said. “We’ve already established that it’s going to be less than a fiduciary standard, but is more than suitability. That’s what our goal is — to define what that means.”

Iowa Insurance Commissioner Doug Ommen wrote much of the draft the working group is tweaking. The “Iowa draft” was introduced earlier this summer in a bid to harmonize the NAIC effort with the Securities and Exchange Commission rule, Ommen has said.

Ommen’s proposal articulates a best interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.

The working group is in the final stages of defining each of those obligations. Once the “wordsmithing” is completed, Froment said, a tentative draft model will be ready “by mid-September.”

That will be followed by “a very aggressive call schedule” to iron out the annuity sales model, she added.


Stretch IRAs And SECURE

By Cassie Miller

Headlines about the SECURE Act have been a little dramatic, particularly related to the stretch IRA provision.

  • “Congress Is Coming for Your IRA,” Wall Street Journal
  • “The Stretch IRA Is About To Snap Under The SECURE Act,” Barron’s
  • “SECURE Act Sucks Life from Stretch IRAs,” 401(k) Specialist

All of these headlines would lead industry professionals and investors to fear the Setting Every Community Up for Retirement Enhancement Act’s elimination of stretch IRA provisions since it was passed by the House. So, is Congress really coming for your stretch IRA? Yes and no.

Congress is planning to eliminate the provisions that make stretch IRAs the tax-deferred havens they’ve been. Under the SECURE Act, if the Senate passes a similar version, the non-spouse beneficiary would have 10 years to pull all of the funds from the IRA. The reason? Congress has to pay for the legislation somehow, and it found its means through making the inherited IRAs subject to higher taxes.

It is actually in keeping with precedent. In 2014, the Supreme Court issued a ruling in Clark v. Rameker that stretch IRAs or inherited IRAs are not retirement accounts because they were not created by the recipient for the purposes of retirement.

“From a public policy standpoint, this is actually pretty consistent with existing law,” said Jamie Hopkins, director of retirement research at the Carson Group.

AdvisorNews Managing Editor Cassie Miller may be reached at [email protected] Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Follow her on Twitter @INNsusan. Contact her at [email protected].

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. Follow him on Twitter @INNJohnH. John may be reached at [email protected].

Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @INNCassieM. [email protected].


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