Archive for December, 2008

Top Story for 2008

Wednesday, December 31st, 2008

The top achievement of in 2008 was to peel away the onion layers of the PPO world to expose the truth behind PPO discounts. It has been an interesting mission indeed. We met with hospital administrators, PPO network officials, PHO groups, all of the BUCA’s to learn as much as we could about the mysterious world of hospital and physcian pricing. One of the BUCA’s told us that we would never, ever get our hands on one of their hospital contracts. They were wrong. And what a story their hospital contract told us!

One interesting assignment in 2008 was a newly acquired client in North Texas, a political subdivision, who for the past ten years were sending their employees to one of the two hospitals in the area. Hospital “A” was the “better” hospital because it was in-network, while Hospital “B” was out-of-network. What we found was that the charges at Hospital “A” through the PPO was three to four times higher than the charges at the non-network hospital ten minutes away. So, in essence, employees and their families were steered to a higher cost facility and thereby increasing the Plan’s cost by over $1 million a year for this small group of about 350 employee lives.

There are numerous other stories regarding our quest for truth about PPO’s that are fascinating but for the purposes of this post, would be quite lengthy.

As a result of our quest for truth, in 2008 we moved several of our more progressive clients from the PPO world into the darkness of the unknown – back to the 1970’s when PPO’s were not yet invented. We had the audacity of recommending that our clients may save more by getting away from the PPO world and dealing direct with the provider community – results so far have been good.

What is interesting is all the players watching our intentions play out jumped on the “Your gonna be balance billed and boy are the employees going to be upset” bandwagon. Through a strategic partnership, we solved the problem of balance billing once and for all.

We have also learned that you can partner with a PPO on a client specific basis to achieve similar results. We found this to be particularly true in working the El Paso market.

We are looking forward to 2009 with the many changes sure to come.

Self-Funded Mini-Med Plan a Success

Wednesday, December 31st, 2008

Two years ago we assisted a 3,500 life restuarant chain in designing a self-funded mini-med program for their hourly employees. The plan offers a $20 physician co-pay, a prescription drug card (not a discount card), 80% coverage up to an annual calendar year maximum of $2,500 per insured. Plan benefit payments use 2007 RBRVS as a benchmark. Plan participatants pay $50 per month while the employer contributes an additional $50 per month per participant. Paid claim loss ratio has been consistantly below 40%.

We have two other accounts on a similar program. One is a long haul trucking firm and the other is a political subdivision located in Texas. The trucking firm has an annual plan limit of $25,000, while the political subdivision has no annual plan limit. Both plans have funding levels of approximately $100 pepm which has proven to be adequate to cover the expense of the plan.

This should give the reader some idea of what a mini-med plan should cost in view of the benefits offered. There are numerous fully-insured mini-med plans in the market  for those employers not comfortable with assuming any risk.  The best fully-insured mini-med plan we have seen has no deductibles, no co-pays and simply pays 100% of Medicare allowable up to $25,000 per calendar year – all for about $128 per employee per month. And, if you realize that less than 4% of any insured group have claims in excess of $25,000, this may be a very good option for the majority of the participants in the plan.  A premium of $128 versus $500 we have seen for a conventional plan, could be affordable for many employers now struggling with the high cost of group health insurance.

PPO Hospital Contract Renews March 1, 2009 with 18% Increase

Tuesday, December 30th, 2008

A South Texas public school district moved from a rental PPO network to a BUCA network October 1, 2008 primarily due to their consultant’s recommendation that such a move in networks will achieve a $1.5 million in claim savings. An attorney for the rental network hired two independent insurance consultants to review the district’s consultant work product, and both found that, in their opinion, the purported $1.5 million in “savings” did not exist. In fact, both concluded,  a move would increase the district’s cost by over $500,000 in fixed costs alone.

This morning we were informed that effective March 1, 2009, the BUCA PPO contract with a certain hospital will be renewed with an overall increase of 18%. Although we learned this from a very reliable source, we have no way of proving this to be true.

Over 90% of hospital utilization of the school district is through this particular hospital.  But if true, the school district will not be notified by the BUCA PPO network of this increase, and the hospital will certainly not inform the district either. In fact, no one will inform the school district that their costs at this one hospital may increase 18%. 

The methodology used by most insurance “consultants” in analyzing and comparing PPO networks is flawed for many reasons. There is only one way to compare PPO discounts.

Texas Workers Compensation Discount Rate Set at 3.95%

Monday, December 29th, 2008

The Texas Department of Insurance Division of Workers’ Compensation reported that the workers’ compensation interest/discount rate for Jan. 1, 2009, through March 31, 2009, will be 3.95 percent. 

The interest/discount rate for the quarter ending Dec. 31, 2008, is 5.22 percent

Massachusetts Nears Universal Health Insurance Coverage

Monday, December 29th, 2008

More than two years after Massachusetts passed groundbreaking legislation to move the state closer to universal health insurance coverage, the Bay State has achieved that milestone, according to a survey released last week. Some 97.4% of Massachusetts residents now have health insurance coverage.

Several provisions in the Massachusett’s 2006 reform law have been key in increasing coverage, expets say, including state premium subsidies for the low-income uninsured, imposing financial penalties of more than $900 a year on those who are not covered under a health plan and a $295 per employee assessment on employers who do not offer coverage.  

New Medicare Mandate Raises Liability Worries for Employers

Monday, December 29th, 2008

Effective July 1, 2009, a new Medicare mandate will require employers to file claim data to CMS in an attempt to ensure that the government saves money in cases where Medicare is supposed to be a secondary payer for its beneficiaries. Self insured employers should assure that their third party administrator is positioned to provide Medicare with the required information.  Employers should be concerned because the penality for failure to report is $1,000 per day per claim. This new reporting mandate is contained in the Medicare, Medicaid and SCHIP Extension Act of 2007 that President Bush signed a year ago. 

TDI Approves 13 Companies to Self-Fund Workers Compensation Claims

Monday, December 29th, 2008

AUSTIN, TX – The Texas Department of Insurance, Division of Workers’ Compensation (TDI-DWC) approved 13 companies to self-insure for workers’ compensation claims for a one-year period under the TDI-DWC Self-Insurance Regulation program. These 13 companies collectively employ approximately 26,500 employees in Texas.

Under Texas law, certain large, private companies can self-insure for workers’ compensation claims, while retaining the protection of the Texas Workers’ Compensation Act for the company and for its employees. To qualify, a company must have a minimum workers’ compensation insurance unmodified manual premium of $500,000 and meet other requirements subject to annual review.

The following thirteen companies received renewals of existing self-insurance certificates: 

  • AAA Cooper Transportation, Dothan, AL
  • American Electric Power Company, Inc., Heath, OH
  • Associated Wholesale Grocers, Inc., Kansas City, KS
  • E. I. du Pont de Nemours and Company, Wilmington, DE
  • Emerson Electric Co., St. Louis, MO
  • FedEx Freight East, Inc., Harrison, AR
  • Guardian Industries Corp., Auburn Hills, MI
  • Hyatt Corporation, Chicago, IL
  • International Paper Company, Memphis, TN
  • The Sherwin-Williams Company, Cleveland, OH
  • Unique Staff Leasing I, Ltd., Corpus Christi, TX
  • Valero Energy Corporation, San Antonio, TX
  • VF Corporation, Greensboro, NC

Life Settlement Investments Bonded by Provident Capital Indemnity Ltd.

Monday, December 29th, 2008

The Texas Department of Insurance cautions consumers that the public is being offered investments in life settlements bonded wholly or in part by Provident Capital Indemnity, Ltd. of Costa Rica (  The bonds are included with the investor agreement to purportedly provide a guarantee to the investor in the event the insured lives longer than the projected life expectancy.

Provident Capital Indemnity has never held a certificate of authority to act as an insurer or surety in Texas nor has Provident Capital Indemnity ever been qualified as an eligible surplus lines insurer in Texas.      tdi-bulliten-provident-capital-indemnity

Austin Indemnity Lloyds Enters Receivership

Monday, December 29th, 2008

At the request of the Texas Commissioner of Insurance, a petition was filed on December 3, 2008, to liquidate Indemnity Lloyds Insurance Company (“Austin Indemnity”). On December 29, 2008, a Liquidation Order will be submitted to the Travis County District Court. As a consequence of the entry of the Liquidation Order on December 29, 2008, all policies issued by Austin Indemnity that are still in effect on January 28, 2009 will terminate effective January 28, 2009.

If TRS ActiveCare will Save Us Millions, Why Have We Not Enrolled?

Friday, December 26th, 2008

In Texas, public school districts are eligible to purchase their group health insurance coverage through the Teacher Retirement System. Most Texas school districts have elected to do so. Rates, for all practical purposes, have remained static over the past 4 years, with the Economies of Scale providing a safe harbor for many.

Yet, we find that there are still some Texas school districts that have elected not to join the TRS ActiveCare program.  It seems that these disticts are paying more by not joining the TRS plan. We are wondering why. Could it be that there are no commissions to be paid to brokers, who in turn are unable to secure school board votes with “campaign contributions.?”  It seems to us that if you can get the same or better coverage through the TRS ActiveCare plan and save a substantial amount of taxpayer money, it would be a prudent business practice to join the TRS plan.

Editor’s Note: The TRS Active Care program is self funded, as opposed to a partially self-funded plan (TRS plan has no stop loss insurance cover).

2008 Audit Report shows $1.1 billion in revenue, $953 million in paid claims. Ratio of total operating expense to revenue is 96.3%. Booked reserves are $476 million. Based on this, we expect little or no increase needed to fund expenses and liabilities through 2009. Plan expenses are low due to lack of stop loss, agent commissions, marketing fees, etc.

For more information on TRS ActiveCare, click here –

Political Subdivision Drops PPO – Balance Billing Issue Solved

Saturday, December 20th, 2008

A South Texas political subdivision decided this month to eliminate their PPO plan and instead pay claims using 2008 RBRVS as a benchmark for physician claims. Facility charges will be paid on a cost plus basis. A special feature of the plan prevents any balance billing to the plan participant. To our knowledge, this is the first Texas political subdivision to take this approach to controling run away health care costs.

  Out of the box strategies to control health care costs

Blue Cross Revises Fee Schedules For Federal Employee Program

Saturday, December 20th, 2008

In response to criticism from federal workers and members of Congress, the Blue Cross and Blue Shield Association has announced that it will revise its 2009 fee structure for out-of-network, non-emergency surgeries  under its standard plan for federal employees.  BCBS — the largest provider of federal employee health insurance plans previously had said members of the plan in 2009 would be responsible for 100% of the cost of an out-of-network surgery, up to a maximum of $7,500 per surgeon, per surgical day. According to the Post, the change “outraged” federal workers and “troubled” many members of Congress.

Under the revised fee structure for 2009, BCBS will cover 70% of the cost and members will pay the remaining 30%, as well as any difference between the allowed amount and the actual bill.



P&C Industry Profits fall 92%

Saturday, December 20th, 2008

Investments and catastrophic losses affected property/casualty insurance industry earnings for the first nine months this year as net income dropped 92%. Net income for the industry after taxes was $4.1 billion for the first nine months of 2008, compared with $50 billion during the first nine months in 2007.

FBI Investigating Bankrupt Brooke Corporation

Saturday, December 20th, 2008

December 19, 2008 – Agents from the Federal Bureau of Investigation have seized files from Brooke Corp. and are combing through the bankrupt insurance agency franchiser’s financial records, the special master appointed to oversee the bankruptcy confirmed. 

Editor’s Note: What will be the immediate future of the Brooke Insurance Agencies in Texas?  

Aetna Underwriting Medical Policies for Cats and Dogs

Saturday, December 20th, 2008

Aetna is offering traditional medical policies for pets as it branches out for the first time from humans to cats and dogs.

The Hartford-based health insurer began underwriting the policies last week in six states, mostly in the West, and in the District of Columbia. Aetna eventually expects to sell in all 50 states.

Two Approaches to Insurance Consulting

Thursday, December 18th, 2008

Not all consultants use the same approach to serve a client’s needs. Consultants will typically take one of two basic approaches when they work with clients:

Consultants as Experts – Many think of consultants as experts. A medical doctor is an “expert” – you explain your symptoms to a doctor, who in turn asks you a few important questions and then tells you what you need to do to get better. This situation is not too different in a business context. The obvious advantage of hiring an expert is that they have knowledge that is not available within the client organization.  One potential problem with hiring an expert is that the expert may not fully appreciate the nature of the client’s business and may recommend actions that cannot or do not address the problem the consultant was hired to solve. Alternately, a client may end up with some wonderful recommendations but be unable to implement any of them because of the unique politics or culture of the company.

Consultants as Facilitators – under this approach the consulant simply assists the client in going through the steps necessary to solve a problem. The consultant “oversees” the project while staff of the client does most of the work. The consultant does not implement changes, take actions, and does not tell the client what solution is best under the circumstances. Instead, the consultant assists the client in defining the problem, analyzing the situation, evaluating possible solutions, and deciding on the best solution and the best way to implement the option choosen. One problem using this approach is that the client group may not be capable of making tough decisions. Many times, the aim is to accomodate all the participant’s view-points and to keep peace in the company. As a consequence, although a consensus may be achieved, it may be at the cost of making the best decision.

Sometimes we get a call into our office, a referral, seeking our services as a consultant. Almost immediately the question is posed: “How much do you charge”? The biggest mistake we have made is to give out a pricing range, without first interviewing the potential client to determine expectations, needs and outcomes. Every consulting job is different and unique.

Medical Tourism – Interesting Facts to Consider

Thursday, December 18th, 2008

An excerpt from :                            

“We are in a sad state.  There are Americans who need life saving surgical procedures each day who simply cannot afford it, do not qualify for state or federal aid, do not know of any other options and die each day because of lack of access to healthcare.  No one talks about this “tragedy” that happens on a daily basis in America, as doctors, hospitals, and the government turn their back on millions of Americans.  Even more Americans don’t take necessary prescription drugs simply because they are unaffordable.    ” Our American health care system is broken leaving many Americans with no access to health care.”
That is why it is so shocking to Americans that they can jump onto an airplane fly several hours outside of American Airspace, and wherever they land the price of surgery and prescription drugs are as much as 50% to 90% less than in America.   Does that make sense?   That a prescription drug costing $150 costs $15 outside of the US, or a injectible prescription drug that costs $1,800 costs $900 outside the United States.  The exact same drug by the same drug manufacturer?  Is the drug subsidized by the foreign government?  No!

So, the next question the uninsured asks is what does the hospital look like and what experience do the doctors have.   We have to ask that question because how would it be possibly to provide equal to or better care in a hospital for 90% less than in America.  If a heart procedure that costs $100,000 could only cost $9,000 overseas than the hospital must be sub-standard compared to American hospitals, and the doctors less experienced than American doctors.   Over 500,000 Americans who went overseas for surgical  procedures  in 2006 discovered that the hospitals were equal to or in some cases nicer than American hospitals.     Some American hospitals describe the hospitals as “7 Star” hospitals , nicer than a Ritz Carlton, and they come back and “rave” about the tremendous experience of the doctors and how some were trained in the US or UK.”

“Did you know that 25% of doctors practicing in the U.S. were trained overseas?”
Do you know that the U.S. was rated 37th on the World Health Organization’s Health Report and that the U.S. was beat out by Costa Rica and Columbia?

Editor’s Note: Free health? There is no such thing as free health anywhere. Someone pays for it. But, it is a catchy phrase and will peak one’s curiosity. So, we went to visit and reviewed the power point – free20health20powerpoint20presentation – sure enough, the program does cost something, seems to be about $8 per month.

“Half Guilty” Admitted Felon Faces Sentencing

Wednesday, December 17th, 2008

Admitted “half guilty” felon, Arnulfo C. Olivarez, has been rescheduled to be sentenced for his crimes on March 10, 2009 at 9:30 a.m. in McAllen Texas. See August archives for details of this story.

Broker Strategy Exposed – Are Employers Stupid?

Wednesday, December 17th, 2008

Below is a redacted email received yesterday from a TPA that exposes the methods utilized by some brokers to justify moving from a TPA to a national carrier because of “superior PPO discounts.”:

Here is a group that left a TPA and went to XXXX XXXXX on “promised discounts”.    The current broker was actually trying to show on this year’s renewal, that XX was a good choice.  Let’s really look at the big picture.  The Fixed costs were about the same at $38.00 PEPM.  What made the fixed costs look better was the supposed rebates on the Rx that got the fixed costs to “look” lower.  If you look at the claims cost for Rx it actually went up 4% but 2008 was an immature year.  By maturing this number up 20% the Rx cost actually went up 24% which is double trend.  What we also found out was this group has a lot of employees outside of Texas so the % of savings XXXX XXXXXX  charged is so far at $156,000 this year.  That is an increase of 25% to the fixed costs.  I guess somebody forgot to tell the client about this fee. 

Now the current broker showed a 4% decrease to the claims cost.  But wait 2008 is an immature year, therefore add 20% to this figure and you get a 16% increase in the claims cost.  The group was sold on an increase in PPO discounts which they probably got but the Medical claims went up along with the Rx claims and an increase in the fixed costs.   The renewal for 2009 on the aggregate is about an 80% increase! 

I have seen a couple of supposed studies from brokers who showed moving to a national carrier saved the group money.  Most of the time it is on a Powerpoint and the details are left out.  We need everyone to start looking at claims data because PPO discounts can be manipulated to be whatever you want.  We will be starting a website to post the PPO discount games along with studies like this and other data.  We need to share all of our findings because the national carriers have to back up their promises and it is not panning out.  We has taken over $40 million in claims from the national carriers and we have brought down the claims cost on average of 7% matured.   Data does not lie!

Editors Note:  We are in the process of gathering claim data from various groups that went from rental PPO networks to national carrier networks to determine actual claim costs under both scenarios. So far we find that the purported deep discounts to be realized through national carrier’s PPO networks  as compared to rental networks are not significanly different. Once we complete this documention, we will share it with those who may be interested in learning the truth about PPO discounts.


Coca Cola Uncaps Captive Plan

Monday, December 15th, 2008

“Coca Cola Co., in a potentially groundbreaking move, plans to seek approval to fund retiree health care benefits though it’s South Carolina – domiciled captive insurance company.”

“Coca Cola’s retiree health care funding proposal comes at a time of increased employer interest in using captives to fund employee benefit risks.”

“Observers cite several reasons for the growing corporate interest in captive benefit funding. “You can save money and improve cash flow. There are pluses all the way around,” said Karin Landy, a managing partner with Spring Consulting Group in Boston.”

Employers Eye Innovations to Cheaper, Better Healthcare

Saturday, December 13th, 2008

Risk & Insurance, December 2008

“Two innovations offer solutions outside of cost-shifting and dropping coverage for self-funding companies that still would like to provide cheaper but top-notch benefits to their employees.”

“One option is to get healthcare providers to charge what medical services actually cost.”

“Self-insured companies could also apply leverage to healthcare providers by sending workers someplace else for care. That’s a large part of the premise behind another innovation – a medical travel program.”

Editor’s Note: This is an excellent article. We have initiated these suggestions in some of our more progressive groups over a year ago. This is out-of-the-box kind of solutions that work. See entire article here – cheaper-insurance

Protected: Hospital in Trouble – Press Will Not Report – CEO May Be In Hiding

Saturday, December 13th, 2008

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Let’s Make a Deal!

Wednesday, December 3rd, 2008

This must be the month for making deals:


EL PASO – Former El Paso Independent School District trustee Salvador “Sal” Mena, who was indicted earlier this year on bribery and fraud charges, is negotiating with the federal government in an effort to preempt a trial, according to courtroom testimony.But exactly what those negotiations entail was not revealed Wednesday morning during a status hearing before U.S. District Court Judge Frank Montalvo.

Both Assistant U.S. Attorney Debra Kanof, who is the lead prosecutor in the FBI’s public corruption case, and Mena’s defense lawyer, Miguel Torres, had to appear before Montalvo on Wednesday to update the judge on the status of the case, and possibly to set it for trial.

Instead of setting a court date, Kanof and Torres told the judge they were negotiating. Therefore, no trial was set and a status hearing was set for Dec. 22.

Neither Torres nor officials with the U.S. Attorney’s office would comment on what happened in court or about the ongoing negotiations.

A Common Sense Understanding of Our Health Care System

Wednesday, December 3rd, 2008
This is an excellent piece written by Jeff Seiler in response to an article published by an “expert” in the health care industryhealth-care-reform
Dear Ms. Harrop,
I read with interest you editorial on unfurling a national health plan. I have no doubt that health care costs are a major concern for every corporation, or for that matter the government as well as many individuals. I also think you do recognize that everyone having health insurance will not lower the cost of health care. In the medical insurance business, we have a saying….”claims are claims.” No matter what, somebody is going to be paying for the claims.
However, the assertion that putting primary care physicians (PCPs) on a capitated system that would pay them $250,000 (or whatever dollar amount) has already been proven to be a faulty assumption for lowering costs. HMO coverage was by and large based on that system and from being in the business and from personal experience, I can tell you that it doesn’t work. Primary care may lower some costs, but PCPs being paid on capitation does not save a dime. In fact, PCPs basically turned into triage physicians. They saw as many patients as they could for their capitation payments and quickly referred those with any complaint on to a specialty physician or gave them a prescription to get them out of the office. More or less, “Get out of my office so I can make more money on non-capitated patients.” To say that they would do more on a straight capitated system is pure folly. They would have no incentive to make more money. In fact, like most people with no incentive, they would do very little. If you are going to get $250 K for seeing patients regardless, where is the incentive to do anything more than the minimum?
In the medical care business, 20% of the people cause 80% of the claims. It has been true for 30 years  or more and will continue to be true. Those 20% don’t have minor ailments where they need to see a PCP. They have major ailments requiring lots of specialty treatment. The big dollars that are being spent are really being spent on technology that keeps people alive that would have been dead 20 or 30 years ago.
I’m not saying I have a solution to the cost of health care, but cutting down on the number of uninsured will not lower the cost (their claims will still be there), and neither will a PCP based capitation system. I  am just hoping  (against all hope) that whoever they put in charge of any changes to be made will consult with someone who is actually in the front lines of the business and who understands how the money flows and the system works, because Hillary and her gang did not. McCain obviously didn’t know and it’s pretty clear that Obama knows very little as well.
By the way, in general, insurance company executives and hospital executives and doctors also know very little about how the costs are generated and who gets paid, so don’t count on much realistic help from them in formulating a plan. The executives are far above the fray and managing other things and doctors are notoriously poor at understanding how the system works. It’s a far more complicated subject than most people who are not in the front lines of the business can comprehend and if it’s one thing I am personally tired of, it’s having a government that can’t run itself well, telling other people how things should work.
Thanks for your article though.
Best regards,
Jeff Seiler
S&S Benefits Consulting, Inc.

219 Darien Ln.
Dundee, IL 60118