Archive for March, 2010

Wednesday, March 31st, 2010
A “Carve Out” Strategy
to Help Employers Reduce DB Plan Liability

Many employers continue to have concerns about their defined benefit plan liabilities and how to fully fund their plan by the 2012 deadline enacted by the 2006 Pension Protection Act. As that deadline creeps ever closer, a practical strategy plan sponsors may want to consider a transfer — or carve out — of certain liabilities and costs associated with their plans.

That strategy is discussed in a recent Employee Benefit News article. Key highlights include:

  • A plan sponsor can transfer the liabilities and costs of a particular subset of participants – retirees, for example – to an insurance company by purchasing an annuity.
  • The insurance company, whose core business is managing risk and benefit administration, assumes responsibility for future benefit payments
  • The carve out removes unwanted pension liabilities from the plan sponsor’s balance sheet, reduces the volatility of plan earnings and funding levels, and minimizes the impact of future regulatory changes

An Ideal Solution
United of Omaha’s Pension Guard offers an excellent solution for clients who want to:

  • Terminate an existing defined benefit plan; or
  • Transfer all or a portion of their benefit payment obligations for certain subsets of participants

For more information, contact me directly:

Kerry Roach, Regional Sales Director
Cell: (970) 331-1079
Office: (888) 543-6998
Fax: (402) 351-2176

Jared Baker, Internal Wholesaler
Office: (402) 351-2792
Fax: (402) 351-2176

Get Retirement Right
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Retirement Marketing Solutions, Inc.
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Omaha, NE 68114
National Sales Office
Retirement Marketing Solutions
5475 Rings Rd., Suite 110
Dublin, OH 43017
Retirement Marketing Solutions, Inc. (RMS) is a national wholesaling organization that specializes in retirement products. With seasoned retirement experts located across the U.S., RMS provides sales support, proposal generation, education, enrollment support and ongoing services to independent brokers and advisors. RMS works diligently to develop relationships with select providers to secure quality products and competitive pricing arrangements on behalf of those who sell the products.

A Mutual of Omaha Company

United of Omaha Life Insurance Company and Companion Life Insurance Company are affiliate companies of Mutual of Omaha Insurance Company. United of Omaha Life Insurance Company is licensed in all states except New York. Companion Life Insurance Company is licensed only in New York.

United of Omaha Life Insurance Company accepts full responsibility for all contractual obligations under its group annuity contracts. In New York, group annuity contracts are underwritten by Companion Life Insurance Company, Hauppauge NY. Companion Life Insurance Company accepts full responsibility for all contractual obligations under its group annuity contracts.

No financial liability will be incurred by the parent or affiliate companies for business transacted by United of Omaha Life Insurance Company or Companion Life Insurance Company. Products not available in all states.

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Really Managing Care and Costs

Wednesday, March 31st, 2010

March 30, 2010


One of my favorite health care stories is about Jerry Reeves MD, who in 2004 took the helm of a 300,000 life health plan in Las Vegas, including about 110,000 union members, and drove so much waste out of that system – without reducing benefits and while improving quality – that the union gave its members a 60 cent/hour raise. There was no magic here. It was a straightforward and rigorously managed combination of proven approaches.

Dr. Reeves’ work betrayed the lie that tremendous health care costs are inevitable. To a large degree, the nation’s major health plans abetted this perception when they effectively stopped doing medical management in 1999. (Most have recently begun managing again in earnest.) The result was an explosion in cost – 4 times general inflation and 3.5 times workers earnings between 1999 and 2009 – that has priced a growing percentage of individual and corporate purchasers out of the health coverage market, dangerously destabilizing the health care marketplace and the larger US economy. In 2008, PriceWaterhouse Coopers published a scathing analysis suggesting that $1.2 trillion (55%) of the $2.2 trillion health care spend at that time was waste.

As the chief sponsors for most Americans’ health coverage, businesses have struggled to cope with health care cost while identifying value. Large American businesses, with tens or hundreds of thousands of employees, have recruited high profile benefits professionals – think of Jill Berger at Marriott, Ned Holland at Embarq, Peter Hayes at Hannaford Brothers or (the recently retired) Cecily Hall at Microsoft, each with terrific reputations – who, with their staffs, orchestrate sophisticated campaigns focused on the health of their employees and their families, and on the cost-effectiveness of their programming. Even so, few large firms provide comprehensive, quality benefits at a cost that remains consistently below national averages, and for years now America’s CEOs have routinely reported that their top business concern, health care, is their most unpredictable, large cost.

For mid-sized business, though, – here I’m referring to firms with 200-5,000 employees – the task is significantly more difficult. Health benefits managers in these companies have far fewer resources, typically work alone without the benefit of staff, and are often overwhelmed by the complexity of their tasks. Held accountable for their organizations’ health costs, they often default to whatever the brokers and health plans suggest. 

But a few excel. For them, managing the many different issues – e.g., chronic disease, patient engagement, physician self-referrals, specialist and inpatient over-utilization, pharmacy management – is a discipline. A couple years ago, I was introduced to someone like this. 

Barbara Barrett was trained as a paralegal. She is now General Manager of TLC Benefit Solutions, Inc., the benefits management arm of Valdosta, GA-based Langdale Industries, Inc., a small conglomerate of 24 firms with 1,000 employees, engaged primarily in wood products for the building construction industry, but also in car dealerships, energy and other concerns. 

Valdosta is rural, which puts health benefits programs at a disadvantage. Often there is only one hospital nearby and so little cost competition. Rural Georgians also may have lifestyles that make them prone to chronic diseases, which are expensive. And so on. You get the idea. 

Here’s the interesting part. Since 2000, when Barbara assumed responsibility for the management of Langdale’s employee health benefits, per employee costs have risen from $5,400/year per employee to $6,072/year per employee in 2009. That’s an average health plan cost growth of 1.31 percent per year.

I compared Langdale’s health plan cost growth to the average commercial coverage inflation rate for an employer with 200+ employees provided in the Kaiser Family Foundation/Health Research and Educational Trust (KFF/HRET) 2009 Employer Health Benefit Survey. The calculation showed that, in that nine years, Barbara’s management allowed Langdale to provide its 1,000 employees and their families with comprehensive medical, dental and drug benefits for $29 million less than the average of other firms that size. That’s a nine year savings of $29,000 per employee, or an average of $3,200 per employee per year lower than the national average. All without reducing benefits or transferring the cost burden to employees, and while quantitatively improving quality.


So how did Barbara approach the problem? Here are a few of her steps:

Under her leadership, Langdale set up TLC Benefit Solutions, a HIPAA-compliant firm that administers and processes Langdale’s medical, dental and drug claims. This allowed Barbara to more directly track, manage and control claim overpayments, waste and abuse.

The claims also gave her immediate access to quality and cost data on doctors, hospitals and other vendors. She supplements these data with external information, like Medicare cost reports for hospitals in the region. This allows her to identify physicians and hospital services that provide low or high value. She then created incentives that steer patients to high value physicians and services and away from low value ones. When complex services necessary to treat certain conditions are not available or of inadequate quality or value locally, she shops the larger region, often sending patients as far away as Atlanta, three and a half hours away.

She analyzes the claims data to identify which patients have chronic disease and which patients are likely to have a major acute event over the next year. Chronic patients are directed into the company’s opt-out disease management/wellness/prevention program. Acute patients are connected with a physician for immediate intervention.

She provides Langdale’s employees and families with confidential health advocate services that explain and encourage use of the company’s wellness, prevention and disease management programs. And she uses incentive programs to reward patients who enter these programs and meet targets.

Barbara has mounted many more initiatives in group health, but her responsibilities also extend to life, flex plan, supplemental benefits, retirement plan, workers’ compensation, liability and risk insurance. The results for Langdale in these areas include lower than average absenteeism, disability costs and turnover costs.

The point is that Ms. Barrett and Langdale have been pro-active, endlessly innovative, and aggressive about managing the process. That attitude and rigor has paid off through tremendous savings, yes, but it has also produced a desirable corporate environment that demonstrates that Langdale values its employees and the community. The employees and their families are healthier as a result, and are more productive at work. This has borne unexpected fruit. The industries Langdale is in have been hit particularly hard by the recession, and the benefits savings Barbara’s efforts generate have helped save jobs.

Barbara Barrett and many others like her on the front line are virtually unknown in health care. Most often, their achievements go unnoticed beyond the executive offices.

But they manage the health and costs of populations in a way that all groups should and could be managed.

Brian Klepper is a health care analyst.

Wednesday, March 31st, 2010
To Our Valued Sales Partners:
Health care reform will present both challenges
and opportunities for our industry, for The IHC
Group and for our valued partners. We are in
a good position to take advantage of the opportunities, and to respond favorably to
the challenges. Here’s why:
We have time to react.

Although there are a few provisions that will kick
in fairly quickly, such as no pre-ex requirements
for children and elimination of lifetime and “unreasonable” annual maximums, the most significant changes do not begin until 2014.
The vast majority of our medical plans in the
small group and individual market already have extremely high annual and lifetime maximums.
The devil is in the details.
For example, the legislative language regarding minimum loss ratios, which is set to start in
2011, is far from clear. The implications of a minimum loss ratio standard—by company size, by product, by duration,by class of business, by claim definition—are still to be determined. The
role of limited medical plans in not clearly defined.
Agents will be part of the process.

Although compensation methods may look
different in 2014 and beyond, nothing in the
new law precludes the role of agents.
IHC Health Solutions has a strong
online presence.

We had more than 1 million online sessions
in 2009, and that was prior to the launch of
MNL online. By maximizing our online presence, we have set ourselves apart from other carriers.
By making it easier for our producers to serve
their customers, we improve our ability to adapt positively to regulatory change.
We are diversified—and becoming even
more diversified this year.

The IHC Group’s employer stop-loss segment
could likely be enhanced as self-funding of
health benefits will become more attractive to certain (particularly smaller) employer groups.
We expect continued growth in our dental and vision business lines. This year we plan to
launch Medicare Supplement plans. We have
been growing our dental and group life blocks of business. We have plans to be a key player in
the critical illness and accident medical arenas. And we are committed to continued success of
our small group and individual medical business lines, including short-term medical.

Some key things to remember.
For the next six to 12 months very little changes, so we need to keep doing what
we do best. In fact, we may have more opportunity for sales as consumers lock
in plans that will be grandfathered under
the new rules.
Almost none of the rules are fully established. There are two national
elections between now and 2014.
There are provisions of the new law
that favor smaller companies like us in
order to promote competition.
We will be regularly communicating with you as details emerge.

We have a bright future at IHC Health Solutions regardless of how the changes play out.
Health insurance reform has been happening incrementally for many years, and we have
been adapting to it. Change is inevitable, but success is optional. Let’s work together to
make the most of this opportunity.

Jeff Smedsrud
CEO, IHC Health Solutions
Co-President, Fully Insured Division




For agent use only. Not for public distribution or solicitation.
Copyright © 2010 IHC Health Solutions

Wednesday, March 31st, 2010









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Video: Our priorities for health care reform.


Health Care Reform – Timeline

The federal health care reform legislation, known as the Patient Protection and Affordable Care Act, signed by the President on March 23, 2010, and the Health Care and Education Reconciliation Act approved by Congress, signed by the President today, will expand the availability of health care coverage to millions of Americans. While some of the measures will be implemented this year, many do not take effect until 2014 and some extend out to 2020.

Below is a high-level overview of the timeline.  It is important to note that many of these reforms and their effective dates are subject to the rules and regulations process both at the state and federal levels – which could alter the intended timing of implementation.


New Programs:
* Temporary retiree reinsurance program is established
* National risk pool is created, small business tax credit is established
* $250 rebate for Medicare members who reach the ”doughnut hole”

Insurance Reforms:
* Prohibits lifetime benefit limits – based on dollar amounts
* Allows restricted annual limits on the dollar value of certain benefits
* Coverage rescissions/cancellations are prohibited (except for fraud or intentional misrepresentation)
* Cost-sharing obligations for preventive services are prohibited
* Dependent coverage up to age 26 is mandated
* Internal and external appeal processes must be established
* Pre-existing condition exclusions for dependent children (under 19 years of age) are prohibited
* New health plan disclosure and transparency requirements are created


Insurance Reforms:
* Uniform coverage documents and standard definitions are developed
* Minimum medical loss ratios are mandated

Medicare Reforms:
* Medicare Advantage cost sharing limits effective
* Medicare beneficiaries who reach the doughnut hole will receive a 50% discount on brand name drugs
* A 10% Medicare bonus will be provided to primary care physicians and general surgeons practicing in underserved areas, such as inner cities and rural communities.
* Medicare Advantage plans would begin to have their payments frozen.

* Employers are required to report the value of health care benefits on employees’ W2 tax statements.
* Annual industry fee for pharmaceutical manufacturers of brand name drugs.
* Voluntary long term care insurance program would be made available to provide cash benefit for assisting disabled individuals to stay in their homes or cover nursing home costs. Benefits would start five years after people begin paying a fee for coverage.
* Funding for community health centers would be increased to provide care for many low income and uninsured people.


* Hospitals, physicians, and payers would be encouraged to band together in “accountable care organizations.”
* Hospitals with high rates of preventable readmissions would face reduced Medicare payments.


* Individuals making $200,000 a year or couples making $250,000 would have a higher Medicare payroll tax of 2.35% on earned income —up from the current 1.45%. A new tax of 3.8% on unearned income, such as dividends and interest, is also added.
* Medical expense contributions to flexible spending accounts (FSAs) limited to $2,500 a year—indexed for inflation. In addition, the thresholds for claiming itemized tax deduction for medical expenses rise from 7.5% to 10% of income.
* Medical device manufacturers would have a 2.9% sales tax on medical devices; devices such as eyeglasses, contact lenses, and hearing aids would be exempt.
* Eliminates deduction for expenses allocable to Medicare Part D subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees.


Coverage Mandates & Subsidies:
* Individual and employer coverage responsibilities are effective. 
* Individual affordability tax credits are created and small business tax credits are expanded.

Health Insurance Exchange & Insurance Reforms:
* State individual and small group health insurance exchanges operational.
* Guaranteed issue, guaranteed renewability, modified community rating and minimum benefit standards (“essential benefits” plan) effective. 
* Lifetime and annual dollar limits are prohibited for essential benefits.
* Pre-existing condition exclusions are prohibited.

Taxes & Fees:
* Addition of new taxes on health insurers

Medicaid and Medicare Reform:
* Medicaid expanded to cover low income individuals under age 65 up to 133% of the federal poverty level—about $28,300 for a family of four.
* Minimum medical loss ratio of 85% required for Medicare Advantage plans


Taxes & Fees:
* Tax (“Cadillac tax”) imposed on employer sponsored health insurance plans that offer policies with generous levels of coverage.


Medicare Reform:
* Doughnut hole coverage gap in Medicare prescription benefit is fully phased out. Seniors continue to pay the standard 25% of their drug costs until they reach the threshold for Medicare catastrophic coverage.
See Aetna’s work to transform Health Care in America. 

Aetna is the brand name used for products and services provided by one or more of the Aetna group of subsidiary companies. Those companies include Aetna Health Inc. and Aetna Health Insurance Company, 151 Farmington Avenue, Hartford, CT 06156

© 2010 Aetna Inc.

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Wednesday, March 31st, 2010

   MARCH 2010      
      ISSUE 1   

On Tuesday, March 23, President Obama signed the Patient Protection and Affordable Care Act into law, bringing wide-spread reform to the U.S. health system and some significant changes to the health insurance industry.

With the passing of this law comes many questions and uncertainties regarding the reform components and the implementation timeline. As a valued broker, Guardian is committed to ensuring that you and your clients are kept up-to-date with reform developments and aware of any potential impact that reform may bring.

The health reform law is certainly a complex and large piece of legislation to fully digest and understand. Furthermore, not all of the details of the reform provisions have been clearly defined yet by the federal government. Additional legislative activity, as well as extensive rulemaking will most likely occur over the next 12 months and beyond, providing some additional guidance to both carriers and brokers. Click here to learn more >


America’s Health Insurance Plans (AHIP) has developed two great reform resources that we encourage you to review: The Reform Law Summary and Reform Implementation Timeline. Please visit the AHIP website for the most up-to-date information on reform at or the National Association of Health Underwriters (NAHU) .

Three Reform Provisions That Your Clients Are Interested In Now
1 Dependent Coverage Extended To Age 26 On Medical Plans
2 No Lifetime Limits On Medical Plans
3 No Pre-existing Conditions On Medical Plans
  Read Guardian’s Disclosures, Privacy Policies, SEC Rule 11Ac1-6 Quarterly Report.
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MultiPlan Completes All Stock Acquistion of Viant

Tuesday, March 30th, 2010

MyHealthGuide Source: MultiPlan, 3/15/2010, and

New York, NY – MultiPlan, Inc. announced that it has acquired Viant, Inc., bringing together the considerable expertise and complementary solutions of both companies to produce what MultiPlan believes will be the industry’s most comprehensive provider of healthcare cost management services.

“The timing couldn’t be better for Viant to join the MultiPlan family, as containment of healthcare costs has become the nation’s imperative,” said Mark Tabak, MultiPlan’s Chief Executive Officer. “Together, we plan to more effectively leverage our companies’ combined expertise and technology to improve efficiencies and patient flow for providers, driving significant savings for healthcare consumers and payers.”

Founded in 1980, MultiPlan is a provider of PPO network and related transaction-based solutions that reduce the per-unit costs of healthcare claims. MultiPlan contracts directly with over 5,000 hospitals, 115,000 ancillary care facilities and 625,000 practitioners who participate in the company’s national primary and complementary PPO networks.

Established in 1990 as Preferred Payment Systems, Inc., Viant today offers PPO networks, network management, pre-payment and post-payment services to commercial and government clients. Viant’s networks represent approximately 5,400 hospitals, 95,000 ancillary facilities and 600,000 practitioners.

Added Tabak, “With our combined product lines, MultiPlan has a solid foundation from which to develop new solutions as healthcare reforms take shape. We look forward to working with our new colleagues at Viant to meet the needs of this changing marketplace.”

Together, MultiPlan and Viant offer healthcare payers an end-to-end solution for managing healthcare unit costs on a pre- and post-payment basis.

About MultiPlan

MultiPlan, Inc. is the industry’s most comprehensive provider of healthcare cost management solutions. The company provides over 2,300 clients with a single gateway to a host of primary, complementary and out-of-network strategies for managing the financial risks associated with healthcare claims. Clients include large and mid-sized insurers, third party administrators, self-funded plans, HMOs and other entities that pay claims on behalf of health plans. Incorporated in 1980, MultiPlan is owned by a group of investors led by the Carlyle Group. Visit

About Viant

Viant, Inc. (through its subsidiaries including Texas True Choice and national PPO network, Beech Street) provides healthcare payment solutions through primary and complementary networks, integrated network and contract management, non-network cost management services and post payment audit and recovery services to the U.S. commercial and public health insurance sectors. Viant’s comprehensive and effective cost management strategies focus on timely, accurate and fair payment for providers, payers and patients.  Visit

Another Point of View

Tuesday, March 30th, 2010

There are enough problems with reform – big, obvious, scary problems – that make lying about reform unnecessary. Yet opponents continue to resort to ludicrous, unsupportable, and completely false claims about the bill, with some of the leading detractors choosing to rewrite history in an effort to scare voters and score political points.

It is NOT socialized medicine, socialized healthcare, government-controlled health care, a violation of the US Constitution, or any of the other ridiculous charges leveled by people who should be more responsible. The reform law is:

– pretty centrist – no public option, utilizing private, for-profit insurers to deliver insurance

– without price controls on providers or insurers, and with no utilization controls to speak of

– based on a very weak mandate that is more accurately described as a fine for those who decide to forgo coverage

Among the demagogues who know better is Newt Gingrich the former House Speaker is outraged, outraged I say, at the Democrats’ passage of the insurance mandate. He’s obviously had a change of heart, as a few short years ago he not only called for an enforceable mandate in a speech, he did it in two of the books he wrote.

Newt’s flip-floppery came about just yesterday, when the following dialogue took place on that fair and balanced network:

HANNITY: Do you think any of these constitutional challenges that are out there about the employer mandate, individual mandate, or any of the other challenges — do you think as they work their way through the courts, that any of that will be effective?


GINGRICH: Then you have to appeal the president’s ruling and they’d probably lose that fight. But what my sense is — first of all, I’m glad to see that some 13 attorneys general around the country —

HANNITY: Are going to sue.

GINGRICH: Have sued. Based on a 1992 Supreme Court decision which said that the federal government cannot punish you for failure to do something, I think that there’s an outside chance the suit will hold up. And that that will stop the individual mandate at the federal level.

Hmmm, seems pretty unequivocal.

here’s what Newt said just two years ago: “According to a June 11, 2008 Associated Press article (accessed from the Nexis database), which ran under the headline, “Gingrich suggests insurance mandate for those who can afford,” Gingrich reportedly “outlined his strategy to combat rising health care costs a plan of attack that includes insurance mandates for people who earn more than $75,000 a year” at a visit to a Nebraska health system. The article went on to report that “Gingrich called it ‘fundamentally immoral’ for a person who can afford insurance to save money by going without, then show up at an emergency room and demand free care. He said those who can afford insurance and choose not to buy it should be required to post bonds to pay for care they may someday need… Gingrich said everyone should have insurance, but not provided by the federal government.” [emphasis added]

(from MediaMatters)

Is he so ignorant, or so ballsy, that he doesn’t think anyone will pay attention to what he said, or wrote, a few short months ago? Or is Gingrich so driven, so insanely desperate for power, that he’ll be blown by political winds like a feather in a gale? Gingrich’s patently false statements are prima facie evidence of the depths to which right-wing opponents will descend in pursuit of power and popularity.

It’s disgusting and abhorrent behavior, and ill serves the nation.

What does this mean for you?

The new law of the land is nowhere close to perfect, or even very good; as I’ve said repeatedly I’m deeply concerned about the law’s all-but-complete failure to address costs. There’s so much misinformation circulating about health reform it is impossible to keep track of it all, much less debunk it.

When you hear Romney, or Boehner, or McConnell, or their fellow wingnuts proclaim the end of America as we know it, ignore them, or better, marvel at the lengths they will go in pursuit of the votes of the ignorant.

Editor’s Note: This was written by Joe Paduda, nationally known expert on our health care delivery system.

Health Care Without Borders

Tuesday, March 30th, 2010

In Mexico, they have a socialized healthcare system, it is known as IMSS. At IMSS people wait in a large, open room to get screened before seeing a doctor. But in many cases, after a long wait, they may not get the treatment that is needed. This is because IMSS is running out of money. People who have serious illnesses might get superficial treatments, while a person with a simple illness, like a sprained ankle, can get as much as a 7 day incapacity.

An incapacity is the official declaration from IMSS that you have been treated and are excused from work until the end of your incapacity. In one case of a sprained ankle, the incapacity was for 7 days. For seven days, a 20 year old man was not allowed to work, and only recieved 60% of his salary during the incapcity. The reason he was given the incapacity, and a seriously ill person was not, is simple. It costs IMSS nearly nothing to treat the man with the sprained ankle.

All corporations in Mexico pay taxes to IMSS, they are approximately 10% of payroll. But, because the care given by IMSS is so poor, most large corporations pay for a private major medical insurance for their employees in addition.

Amost all middle class citizens have their babies in private hospitals with private doctors, and go to private doctors when they are ill. If you are pregnant, and middle class, you will still need to go to IMSS which is required by law to grant a 90 day leave of absence from work. The leave is taken 45 days before the birth, and 45 days after. Even if you are able or willing to work, you cannot.

Medications are not supplied by IMSS, although they are prescribed. Blook is not provided, and must be purchased from the local blood bank.

It is not uncommon for employees to collect money from co-workers to help fund medical expenses, especially for lower income workers.

Furthermore, a person must be employeed to receive benefits from IMSS. A special program is available for unemployed people, but at a lower benefit level.

Many times ill employees need to miss work to go to IMSS for treatment, but they are turned away without an incapacity, even for the day they spent attempting to get treatment. In addition there is a transportation expense for the employee, as well as lost income for missing work. They may also have the absence counted as an unjustified absence on their attendance record. If the illness does not go away and the absenses mount, the employee may face disciplinary action by the employer. These types of problems have forced employers to reqrite their attendance policies to be more lenient in order to avoid having to discipline, or worse, terminate, an otherwise good employees.

While is it not completely clear what Congress in the US is proposing, there do appear to be many elements that are similar to IMSS. Is this what we want in the US healthcare system?

Editor’s Note: This article appeared in March 2010 issue of Freedom Today!. Their website is

CIGNA Publishes Health Care Reform Bill Market Provisions Timeline

Tuesday, March 30th, 2010

This is one of the best we have seen in the past several days – HCR Timeline

Monday, March 29th, 2010
Health Care Reform: Keeping You Informed
Mon, March 29, 2010 2:23:19 PM

CIGNA <ProducerCommunications@CIGNA.COM>

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| Provider Directory | About Us | News | Careers | Contacts | Log In
March 29, 2010
Health Care Reform: Keeping You Informed

Join us for a
live interactive
web meeting
Hosted by CIGNA’s
G. William Hoagland,
Vice President of Public Policy
& Government Affairs

Client Web Meeting
Wednesday, April 7,
2:00 pm ET
(1 pm CT, Noon MT, 11 am PT)

Broker and Consultant
Web Meeting

Wednesday, April 7,
3:30 pm ET
(2:30 pm CT, 1:30 MT, 12:30 PT)

The long, drawn out legislative debate on health care reform is coming to a conclusion. But, of course, in many ways the real debate and very difficult process of implementing the legislation has only just begun.

CIGNA values our shared business relationship. That relationship is inextricably linked with this new law, its interpretation and most importantly its implementation. We are all in this together.

Given the complexity and magnitude of the health care reform legislation, our approach toward it has been cautious and watchful for a number of reasons. First, the Act signed into law by the President on March 23 was amended by further legislation (The Health Care and Education Reconciliation Act) that was approved by Congress on Thursday, March 25. The task of interpreting the law, to the extent sufficient details are included in the bill, can now begin.

Second, you are also likely aware of legal challenges being mounted by some states concerning key aspects of the legislation. These actions will not only make the implementation schedule even more problematic with a law as complex as this but may also have unintended and unforeseen consequences.

Third, once we have a final bill, we will all discover that it delegates to the Secretary of HHS, Treasury, and Labor extensive authorities for interpreting many provisions impacting our business relationship. Some of these regulations will come quickly such as setting the medical loss ratio requirements or defining dependent eligibility on a parent’s insurance plan, while others such as the employer and individual mandates and minimum benefits will be longer in development.

Nonetheless, it is our responsibility as business partners to provide you with our best thinking on what this legislation will mean for you and when we can expect implementation. It is our further responsibility to reflect our and your concerns as regulations are drafted, proposed and finalized. Finally, with our collective real world experience, I am hopeful that we can revisit certain provisions in the law for refinement or amendment in the coming Congress.

In the immediate timeframe, where we are confident of the legal interpretation and how we will implement those provisions, we will continue to keep you informed through your CIGNA representatives. We are resolute in our desire to make your and our transition to this new health care landscape as efficient, effective, and painless as possible. I commit CIGNA, my management and my business team members to help you as we address the challenges and opportunities that lie ahead.

Click here to view a high-level timeline for the key provisions of the Act. As has been our practice, we will host web meetings regarding the provisions of the Act. The next web meetings will occur on April 7. We will offer a session for clients at 2:00 pm ET and a separate session for brokers and consultants at 3:30 pm ET that you are welcome to join.

We look forward to our discussions on health care reform on April 7.

David M. Cordani
President and Chief Executive Officer

We welcome your feedback. Let us know what types of articles you would like to see in this e-mail.

Thank you.

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“CIGNA” and the “Tree of Life” logo are registered service marks of CIGNA Intellectual Property, Inc., licensed for use by CIGNA Corporation and its operating subsidiaries. All products and services are provided exclusively by such operating subsidiaries and not by CIGNA Corporation. Such operating subsidiaries include Connecticut General Life Insurance Company (CGLIC), Tel-Drug, Inc. and its affiliates, CIGNA Behavioral Health, Inc., Intracorp, and HMO or service company subsidiaries of CIGNA Health Corporation and CIGNA Dental Health, Inc. In California, HMO plans are offered by CIGNA HealthCare of California, Inc. and Great-West Healthcare of California, Inc. All other medical plans in California are insured or administered by CGLIC. CGLIC has acquired the business of Great-West Healthcare.

03/10 © 2010 CIGNA

Public Education and Public Health Care – Any Similarities?

Monday, March 29th, 2010

Public education in the United States is a “mandatory” entitlement funded through taxation. So too will be health care in this country

Will there be any similarities between these two entitlements? We think so.

Although we all pay for pubic education through taxes, some of us have sent our children to private schools at an addtional expense.

Health care will be no different.  As taxpayers we will be legislated to pay the costs of a public health care scheme, yet some taxpayers will pay additional monies for “private care.”

Private care will be based on the premise that providers and patients can conduct commerce with each other without government intervention of any kind.  The goal of private health care is to provide timely access to quality care at a reasonable price.  A pre-paid cash system would be one means to finance the scheme.

As private schools excell in quality education and better than average outcomes, so too will private health care plans.

More to follow as this concept develops.

Health Insurance Brokers Become Extinct

Friday, March 26th, 2010

As did Encyclopedia Brittanica salesmen, health insurance brokers will become extinct in the United States in less than 36 months. Those that survive that long will be working for pennies on the dollar and may become early beneficiaries of extended Medicaid Benefits.

The first to “turn” on the independent health insurance broker with be the carriers who will finally figure out that they would be better off without them. But the last laugh will be on the agent’s side as carrier sales reps. are added to the Medicaid recycling bin too.

Mr. President, There Is More Than One Way To Sing The Blues……….

Saturday, March 20th, 2010

After a week of sound bites from our President and leaders in Washington demonizing our industry, I thought you would like to hear “the other side of our story.”   

Out of the blue last week, I received a call from a friend whom I had not heard from in a while.   After the hello’s, how are you and the family and so forth, I was told the reason for the call. 

To my great sadness, I learned my friend was ill, very ill.   “I really hate to call you after all of this time, but I know you are in the business and thought maybe you could help.   I have a box of bills and claims from my insurance company and doctors and have no idea how to pull this all together.   I want to pay what I owe, but don’t know where to start.”    I told my friend no problem.   I would actually be driving through my friend’s home-town later in the week and would be happy to drop by and help sort this out.  

As soon as I arrived, we began sorting through a box of papers, a big box!  After sorting and gaining an understanding of where we stood,  we contacted the insurance company first.   Of course it was, “we need an authorization” and so forth.   This was all completed and we were ready to go.   

We were able to meet with the insurance company representative almost immediately.   This may come as a surprise Mr. President, but this insurance company representative did not have horns, did not breath fire, did not tell my friend that he was cancelled because he was sick, did they give a hint that my friend would be better off dead and did not  threaten to deny claims.   

The representative was the antithesis of a post office clerk.     

This Blue Cross Blue Shield Rep took their time in understanding my friends problem, sorted out their claims, explained what was paid correctly and why, explained what was paid incorrectly and adjusted for payment and smiled the entire time.

Of course, none of this surprised me….I’ve been in this business a long time and know what happens in the real world of health insurance.  

So next time we turn on the tube and hear our President making insurance companies out as the bad guy, remember that kind and compassionate BCBS Rep who took  time to help out a friend.   Bottom line is that we are all hard working individuals with knowledge and experience far beyond our elected officials in Washington who may be changing all of our lives forever.   

Editor’s Note: Many consider BCBS as among one of the most respected health insurance companies in the United States. What makes any company great is the people who represents them, from top to bottom. 

Friday, March 19th, 2010

March 19, 2010
1:26 pm EDT
Breaking News

   The American Medical Association supports the sweeping $940 billion healthcare reform bill scheduled for consideration on the House floor on Sunday, AMA President J. James Rohack announced.Read more in 30 minutes at

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TRS ActiveCare Announces New Premium / Benefit Changes

Wednesday, March 17th, 2010

TRS ActiveCare Board of Trustees have approved rates and benefits for the 2010-11 Plan Year. This program provides health care benefits for Texas School District employees and is administered by Blue Cross & Blue Shield.

Rates are to be increased approximately 7%. There are minor benefit changes to be implemented.

Of interest is the payment methodology to be changed for “Allowable Amount for non-contracted provider services”. Currently that method is “determined by Blue Cross & Blue Shield of Texas”. Under the new Plan Year benefits, non-contracted providers (non-PPO) will be reimbursed at “50% of the non-contracted provider’s billed charges.”

Does this mean if Dr. Smith bills $1000 and Dr. Jones bills $1,200 for the same service, does Dr. Jones will get more for his work than Dr. Smith gets?

The Truth (As We See It) About the Blue’s PPO Discounts

Wednesday, March 17th, 2010

It is hard to cope with the dynamo known as Blues. Who is going to tell them what to do when they have about a 30% market share in Illinois with no competitor even close to that number? The “caring card” carries considerable weight with employees who equate it with security and the heavy advertising for the health plan that says they care. Employers have been known to be too scared to change away from the Blues, due to the perception on the part of employees, that there is no better coverage. The advertising that they do by sponsoring what seems to be every home run or first down in Chicago sports is effective. This will tell at least in part, how they can afford to pay for it, when most other insurance carriers can’t.

By the way, this article is not being written because we won’t do business with the Blues or because we see them as the only carrier with faults. However, over the years we’ve gotten tired of hearing the misconceptions and deceptions about what is being offered and how and why they are able to make some of the offers that they do. Suffice it to say that knowing how certain carriers operate can protect an employer from making a choice that can later make it difficult to move on to another vendor. For instance, knowing that the Blues continually only provide claim data that is outdated, helps one prepare for the fact that leaving the carrier will be difficult at best. If you would like us to provide an analysis of your current situation and an underwriting evaluation of where you stand, please feel free to contact us at .

The Question is- Is what you see, what you get?

When receiving a group medical insurance proposal from the Blues, they can claim to have better discounts than the rest of the competing offers (be it a self-funded or fully insured plan) and their pricing to get the business will surely reflect substantial discounts. But now what? Will you as the client ever actually receive the full value of their hospital contracts or physician discounts? Most likely not. Will your broker or consultant advise you of the same? Most likely not. Many broker/consultants don’t have a clue how to experience underwrite and have even less of a clue as to how these plans really operate.

The Principles of Deception

Let’s look at a few things. Back in the mid-1980’s competition was stiff. There were a lot more insurance carriers. The TPA business was getting off the ground. HMOs were popping up in people’s garages, and PPOs were being added to indemnity plans. Managed Care was booming. What were the Blues doing? Offering proposals that included “negative retention!” (For those of you who don’t know, retention is the fancy word for expenses to run an insurance program.) Brokers were actually telling clients (and competitors quoting against the Blues) that the Blues could operate programs with less than zero expenses! You’d think there was enough common sense in the business to think something fishy was going on, but that is not always the case. There’s nothing like a juicy override agreement to override common sense.

So, how do they do that?

The answer is, they don’t. The Blues were ingenious enough to know the market was changing and they had the advantage. The advantage was their relationship with the hospitals and doctors. They had the original PPO, except nobody knew it other than them.

Let’s concentrate on the hospitals. The Blues provide an annuity to every hospital in their network. They have most hospitals in their network. Some would say every hospital in the Western Hemisphere . The hospitals depend on this “annuity” since the Blues are the dominant player in Illinois . (That’s not to say this isn’t or wasn’t happening in other states). The Blues reimburse all hospital claims to the hospitals at Cost, Plus roughly 5% profit.

Let’s say the hospital charges are $10,000, but the cost is really $7,000. Cost plus 5% is $7,350. The Blues pay $7,350 to the hospital and keep the $2,650 profit. By keeping the difference, but charging the client as though the claim was for $10,000, the Blues could claim that there was no retention due to the profit they were taking (but charging as a claim to the client). The claim report to the client shows the $10,000 in hospital charges. (By the way, do you think the employee paid coinsurance on $7,350 or $10,000?)

Well, you say, what about PPOs?

Surely things are different there. Well, yes and no. The hospital accounting still is applicable, but new items have been added. The Blues have had to give up some of their profits in order to compete with other PPO plans, but they have still found a way to keep more than most. Negative retention had to give way and eventually disappeared, once they had to give up some money and show some PPO discounts.

Access Fees you will not believe

One of their brilliant ideas that most don’t catch is that they charge for access to their PPOs as a claim charge rather than identifying a per employee fixed monthly fee (we can’t recall if they had this idea first or stole it from First Health/Affordable).

Their charge for accessing the PPO can amount to as high as 28% of projected net paid claims (including non-PPO claims). On one case reviewed, that charge amounted to $31.11 per employee per month (and this was before the pooling and risk charges were added and the whole amount was divided by the objective loss ratio to make the charge even higher). That is far higher than the usual $3 to $6 per head that most independent PPOs charge.

But that’s OK, the discounts are greater with the Blues, aren’t they?

Maybe the Blues discounts are greater, but we will never know. Unlike (most, but not all) other carriers and third party administration arrangements, the Blues never show their actual discounts.

When we underwrite and review network performance, we usually like to separate billed charges on an In and Out of Network basis. Then we remove ineligible charges from the amounts billed In Network and see what the discounts were compared to actual eligible In Network charges. This gives a more true picture of the discounts achieved.

The Blues only provide their discounts on renewal as projected savings. You never get to see what the real number was! The number initially looks pretty good at 35% to 42% of projected paid claims. But, if you look at other networks with good coverage, as a percentage of actual paid claims, the discounts are usually much higher (50% to 55% of actual paid claims), with access charges that are far less. Remember, most other networks report their actual discounts too, so you actually know what you are getting for your access charge. So, the Blues might have better discounts, but chances are that you, the employer, may never benefit any more than you would with another network. In fact, you may end up paying more.

There are other tricks that are used by companies to overcharge for network access or overstate their discounts. You can review on this web site another article on that subject in THE TRUTH section of the web site.

What about that National Network?

Yes, there is a thing called the Blue Card network that can make sure that you have the opportunity to be in network on a national basis or cover your employees in other states. Just be aware of a few things. Those other state plans get the claim first and then process the claims with the local Blues. It is not a seamless proprietary network. Each Blues plan wants their piece of that discount pie. The delays can also be a bone of contention, since the delay can cause duplicate bills. If the Blues charge for access to the network as a percentage of network savings (as they have been known to do), how do you know you aren’t being charged for savings on duplicate charges due to delayed payment?


Needless to say, with the discount game being played, there is lots of room in underwriting to price for the competition. They may have to give up something in the rates on the front end, but the profits will most likely be there. The Blues also like to give claim experience that is six months old as part of their renewal. This makes it especially difficult for other carriers to underwrite, since the usual standard is to have claims experience that comes to within at least three months (and preferably two) of the proposed effective date. This helps the Blues to insure that you will receive higher than normal quotes from the competition. Underwriters from other carriers view Blues experience with trepidation, since the discounts are unknown and the experience is old. This forces the competing underwriter to be conservative in their assumptions.

The Blues (unfortunately now other carriers are following this poor example) also won’t provide experience on groups of less than 150 employees, although they want that experience if the group is over 100 lives and you want them to quote. Makes sense? You’ll also have to cite federal law and fight with them a bit to get Schedule A information for a group of less than 150, even though the IRS demands the information for a group of over 100 employees.

What the Blues have been able to do is successfully continue to market their market dominance by appealing to those who fear they may not have the same coverage elsewhere. For employers, the fear of employee reprisal and discontent is often enough to get them to accept some pricing tactics that they would not accept from other insurance carriers or third party administrators. Those brokers who continuously push the Blues are easily motivated to do so by override agreements to commission arrangements that Eliot Spitzer has no need to challenge, since they are not in his state. The weak and continually changing insurance commissioners in Illinois are not about to challenge the Blues and their tactics either.

Editor’s Note: This is a Classic, written several years ago by Jeff Seiler, an Illinois based insurance consultant. For additional reading, go to his website and read an update recently posted that “proves” , in the eyes of some, his theories.

Wednesday, March 17th, 2010

“The Group Captive Meets Medical Expense”

Michael A. Schroeder

Jan 4, 2010

“The Group Captive Meets Medical Expense”


Health Care Reform is debated in every news outlet, every day. Ideas for a government plan option stir debate along with other wide ranging suggestions on how to stop the runaway cost of health care. Wellness programs, drug and treatment delivery methods along with coverage availability each claim to be the solution.  Reducing cost or at least slowing the annual increase in the cost of medical care is the objective. How this objective is achieved is where the conflict arises.

Not surprisingly, the answer lies in a solution that brings together the best of each idea. This article focuses on a delivery method for insurance coverage known as a Group Captive. One of the most attractive features of a Group Captive is it provides the ideal insurance platform to deploy many of the cost saving ideas being discussed in the health care reform debate. The “skin in the game” structure of a Group Captive encourages the stakeholders to seek innovative cost saving ideas. In fact, the wellness programs, Rx delivery methods and coverage strategies we hear about as the latest innovation of today have all been tested by self insureds; not surprising when one considers who directly benefits when a medical expense saving is achieved.

What is a Captive?

A Captive is an insurance company that is owned and/or controlled by the insureds. Captives had their start in the 1960’s as a solution for insurance coverages that were not readily available in the standard insurance marketplace. Over the last fifty years, Captive’s have evolved from covering the uninsurable risks of a Fortune 500 Company to insuring everyday exposures like Workers Compensation and Auto Liability of groups and associations. It is the application of this group ownership approach to medical expense coverage that creates the Medical Expense Group Captive opportunity.

Like other Group Captive’s, the Medical Expense Group Captive is owned and/or beneficially controlled by the group member insureds. Similar to other Group Captive members or participants, Medical Expense Group Captive participants are commonly homogenous in their business pursuits. An example of groups that have successfully implemented Group Captive strategies in the property & casualty marketplace include physicians, trucking companies, contractors and accountants. In all cases, the homogenous group agrees to band together and share a certain portion of the risk that is common in all of their businesses. The objective of moderating and reducing the cost of insuring their risk is realized when the group’s risk management strategies reduce losses both before and after they happen.

How Does It Work?

Like standard insurance for medical expenses, a Group Captive program requires infrastructure for the effective delivery of claim payments, including a claims administration or TPA company, an insurer to issue the policies and a reinsurer to cover the large or unforeseen loss events. The Group Captive Program then adds a Captive facility that is controlled by the group to assume a portion of the risk that is typically retained by the insurer. See below the organizational diagram of a Group Captive.

The formation of the Captive facility historically caused the Captive solution to be one limited to larger organizations that could afford the time and upfront investment in actuarial, legal and regulatory professionals. Fortunately, the innovation of the segregated account rent-a-captive facility enables the middle market to access the benefits of a Captive solution. These segregated account Captive facilities enable an insured or group of insureds to efficiently form a Captive that can serve as the risk assumption entity for the Group Captive Program. This Group Captive entity is functional in weeks with no upfront investment in professional expenses or surplus.

Once the Captive facility is formed and the program’s service providers are engaged, the Group Captive members purchase insurance the same way they do in the standard market; they send in their underwriting information, receive a quote and bind coverage. The execution of a contract with the Group Captive facility that is commonly referred to as a participation agreement follows along with a contribution of collateral before the insurer issues the medical expense policy coverage.

The Group Captive then functions like any other insurance company and reports to its owners its financial performance with premium earnings, loss payments, expenses and investment performance activity. Through retaining risk in the Captive and the application of innovative program services designed to prevent and reduce medical expenses, the Group Captive members may experience underwriting outcomes for their Captive reinsurer that enable a return of underwriting and investment income. Without the Captive participation by the insured members, these positive underwriting outcomes would have inured to the benefit of the insurance company alone.  The return of underwriting and investment income obviously reduces the insured members cost of insuring their medical expenses and offers a cost advantage over traditional medical expense insurance coverage.

Why Does It Work?

A Group Captive delivers better results to participating members for several reasons. First, by retaining risk in the Captive facility, the insured members are able to capture a portion of the underwriting and investment income a traditional insurance company typically retains. The profit and overhead component of the standard insurance transaction can be anywhere from ten to thirty percent of the premium dollar paid by an insured. When these profit and overhead dollars are captured by the insured members, their overall cost of medical expense insurance is reduced.

Group Captive members also realize results that surpass their traditional insurance experience because of the shared incentive the members have with each other and the other risk takers. Unlike the traditional insurance transaction where you pay your premium and losses are largely irrelevant to you, when a Group Captive member contributes capital to a risk bearing enterprise that is dependent on the Group’s loss experience, the incentive is for the member to police its claim activity more diligently. This is the “Skin in the Game” concept.  Reduced expenses such as reinsurance are also realized by the Group Captive members who exhibit claim experience more attractive than the overall medical expense insurance marketplace. Shared incentives create shared expense benefits.

Of course, the environment of loss prevention is also stimulated as the Group Captive members search for the most efficient way to deliver Rx, purchase medical procedures and deliver wellness ideas or practices. It is not surprising that many of the best in class health care solutions being advocated by the experts in the national debate have their origin in the Captive or self insurance marketplace. When a new method to mitigate the health risk of patients can be correlated to a premium dollar savings, it is not surprising the members of Group Captives have a higher commitment level to better health outcomes than the typical insurance buyer. Creativity, commitment, oversight and consistency all contribute to the Group Captive offering the best overall price and solution to escalating medical expense costs.

What Can Go Wrong?

The devil is in the details. The benefits a Medical Expense Group Captive offers can be lost when details such as provider networks, excess reinsurance terms, transaction fees and wellness programs are ignored or mishandled. Should the Group Captive also not utilize the efficiencies offered by established turnkey Captive facilities, the organizational costs required to establish a regulatory adequate Captive facility can take years to recover. Experimenting with a new wellness program can deliver returns with little downside, but trying a new service provider without the knowledge and experience with reinsurance treaties and underwriting could contribute to increased costs for the Group Captive members.


A Group Captive approach to insuring your medical expense risk is one of the many strategies available to confront escalating medical costs head on. Take control by not only improving your approach to how health care is delivered to your organization, but how the insurance dollar is spent and returned. When the best possible cost containment services are combined with an efficiently built risk retention facility, the conclusion that a Medical Expense Group Captive offers the lowest cost solution for insuring your health care is evident.


Who is Roundstone?

Roundstone Management, Ltd. (“Roundstone”) based in Westlake, Ohio is an insurance organization focused on the development, underwriting and servicing of alternative risk products, including captives, rent-a-captives and specialty insurance programs. Roundstone offers intermediaries and buyers an expertise in the captive marketplace with an unbundled services approach utilizing the facilities of Roundstone Insurance, Ltd., a class III Bermuda reinsurer registered as a segregated account company.

Michael A. Schroeder is President of the Roundstone organization. Mike offers twenty years of insurance industry management experience with responsibilities in the captive market, self insurance pools and trusts, publicly held insurance companies and the regulatory environment.

Prior to joining Roundstone, Mike served as National Interstate Corporation’s (NASDAQ: NATL) Vice President and General Counsel during the Company’s transition from a closely held mono-line insurer to a NASDAQ listed fifty state AM Best A rated insurance holding company. While at NATL, Mike developed numerous alternative risk structures, including group captives, single parent captives and purchasing groups.

Prior to his position at NATL, Mike provided restructuring and transactional consultation services to firms in the insurance industry, held senior level executive positions with a publicly held worker’s compensation insurer, a non-standard auto insurer and served as an associate in the insurance defense department of a Cleveland law firm.

Mr. Schroeder received his Juris Doctorate from The Ohio State University College of
Law, and received his Bachelor of Science degree in Business Management from Tulane University.

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Insurance Companies & Providers Conspire Against Consumers

Tuesday, March 16th, 2010

What is the first question asked by medical providers when seeking medical care in the United States? After the usual  perfunctory  “Good Morning” or “Good Afternoon” , it is invaribly  “Do you have insurance?”

Insurance companies have negotiated prices upon your behalf for medical care services rendered to you. But, you have no clue what kind of deal has been negotiated upon your behalf. Since you are paying the bill, either in cash due to high deductibles or co-insurance out-of-pocket expenses (fancy word for “your share after insurance pays their share”), or in insurance premiums that seem to go up year after year (even if you dont use the insurance), medical care costs should concern medical care consumers. Yet, that is not the case. Consumers never ask for prices, and never question provider billing statements. Why?

The answer is simple. As a society we have become brainwashed to believe that with insurance we are protected against the high cost of medical care. “It’s not our own money, it’s the insurance company’s money so I really dont care what the cost is, my insurance covers it for me” is today’s mindset.

But is that true? Or do insurance companies simply act as a middle man, or general contractor for our medical care, skimming their cut off the “action?” And, if insurance companies take a loss, who pays for the loss?

Below illustrates an actual encounter with a medical care provider yesterday at an out-patient surgical center in Harlingen, Texas which illustrates what is wrong with our current health care system:

Insurance Person (office clerk):  Good afternoon, do you have proof of insurance with you today?

 Insurance Victim (patient): Well, that’s what I want to talk to you about. You see, I have insurance and I have cash. I would like to know what the difference would be between a cash price and my insurance price.

 Insurance Person: Ok, no problem…………….the cash price is $509……………..and your XXXX price is $548.

 Insurance Victim: Ok, I’ll pay cash instead of using my insurance.

 Insurance Person: Great, that will be $548 please.

 Insurance Victim: Wait!!!, You said the cash price is $509, so that is what I will pay you!

 Insurance Person: No sir! Since you told me you have insurance, and that it is with XXXX, we have to file the claim and get back $548. And since you say you have not met your XXXX deductible yet, you need to give me $548 now, before we do the procedure.

 Insurance Victim: Wait, that doesnt make sense. What difference does it make that I have insurance? I will pay you cash instead.

 Insurance Person: No sir, we have a contract with XXXX and we must have our agreed upon price of $548 before you have your procedure.

 Insurance Victim: I dont care if you have a contract with XXXX, I dont have a contract with them nor do I have a contract with you.

 Insurance Person: Sorry, our office policy stands. Either you pay $548 up front, or go somewhere else to have your procedure done.

 Epilogue – After a very heated discussion in the lobby, much to the entertainment of the patients waiting there, an Agreement was reached. The clinic agreed to accept my cash payment after the procedure is done.

 Here is a video that illustrates what is wrong with our current system –

Monday, March 15th, 2010

  Patricia Hemingway Hall, CEO of Health Care Service Corp

Blue Cross executives’ compensation soars as controversy rages over health insurance premium increases

By Mike Colias
March 15, 2010

Executives at Blue Cross & Blue Shield of Illinois’ corporate parent pocketed big bonuses last year, as more people lost health insurance and rising premiums put insurers at the center of a political maelstrom.

Patricia Hemingway Hall, CEO of Health Care Service Corp., saw her total compensation jump 62% in 2009, to $8.7 million, according to a recent company regulatory filing. Predecessor Ray McCaskey’s $15.7-million payment was bonus compensation built up in the years preceding his 2008 retirement. He served as CEO of the Chicago-based holding company for Blue Cross plans in Illinois, Texas, Oklahoma and New Mexico for 16 years.

All of the non-profit insurer’s top 10 executives saw total compensation jump at least 48% — it more than doubled for six of them — thanks to large bonuses. The company revised its bonus program “to reflect current market-competitive talent practices,” according to a statement. It pegs bonuses to goals for membership and earnings growth, and for keeping a lid on administrative costs.

“To manage a business of this size and complexity, our compensation must be competitive to attract the industry’s best and brightest,” the company says.

Big payouts to insurance execs will provide more ammunition to congressional Democrats and Obama administration officials who are pillorying insurers in an effort to revive health reform legislation. Payouts also rile some policyholders frustrated by spiraling health care costs and the threat of policy cancellations after they get sick, a controversial practice that’s especially common in Illinois (Crain’s, March 8).

“It’s greedy and outrageous for them to make huge profits and bonuses when small businesses are dropping their coverage because they can’t afford it,” says Linda Cherrington, 60, who along with her husband owns Cherrington Design & Building Inc. in Wheaton. After 10 years with Blue Cross, they switched the company’s coverage to another insurer last year when their premium jumped 45%.

Execs’ pay at Health Care Service has risen sharply in recent years, state records show. Including his 2009 compensation, Mr. McCaskey took in $36.5 million over a three-year stretch. He was the highest-paid CEO among Blue Cross operators during that stretch, according to the AIS Report on Blue Cross & Blue Shield plans. (The independent trade publication hasn’t compiled a 2009 ranking.)

Mr. McCaskey’s pay surpassed even that of the chief of Indianapolis-based Wellpoint Inc., the nation’s largest health insurer, whose 2009 revenue of $65.03 billion tripled that of Health Care Service.

Health Care Service is a mutual reserve company, owned by its policyholders. Its 12.5 million members put it among the top five health insurers nationally; most other large players are publicly traded companies that generally have higher annual revenue and more employees.


Health Care Service can’t offer stock options, which make up the bulk of a CEO’s pay at some public companies. Still, private firms often use long-term award plans that resemble incentive programs at public firms, says Mark Reilly, a partner at Chicago-based Compensation Consulting Consortium.

Ms. Hall’s pay last year topped that of Humana Inc. CEO Michael McCallister, whose pay was $6.5 million including stock options, according to a regulatory filing last week. Humana had $30.96 billion in revenue last year, compared with $17.34 billion for Health Care Service. (Health Care Service publicly discloses only its health-premium revenue, which represents the bulk of its business, though it also owns life insurance firms and other subsidiaries.)

Most other big insurers haven’t reported 2009 pay figures. In 2008, Ms. Hall’s $5.4 million in total pay was higher than that of Minneapolis-based UnitedHealth Group Inc. CEO Stephen Helmsley, who received $3.2 million including stock options. But both were dwarfed by Aetna CEO Ronald Williams’ $24.3 million.

Directors of Health Care Service generally were paid less than those at the larger insurers after factoring in stock options, with one exception: Chairman Milton Carroll’s $800,421 total compensation in 2008 was by far the highest among non-executive directors of any Blue Cross plan or any of the five largest publicly traded insurers. His paycheck grew to $944,951 in 2009. The compensation “is reflective of the fiduciary duties and scope of responsibilities for this role,” the company says.

Health Care Service posted a net profit of $514 million on its health insurance business last year, down 31% from a year earlier and roughly half of the more than $1-billion profit it turned annually from 2004 to 2006. Rising unemployment trimmed the membership rolls of its employer-based group policies. Health Care service itself eliminated 650 jobs, or 4% of its workforce, last August.

Higher-than-expected medical costs last year hurt profits, but the company also decided to plow more money back into the business and got more competitive on pricing, according to a January report from Moody’s Investors Service. Blue Cross says its average premium increase in Illinois this year will be 10%, lower than most other health insurers’ rate hikes.

Mr. Reilly, the consultant, was surprised that the firm’s executive compensation jumped so dramatically in a down economy.

“I would think a policyholder-owned company would pay executives a little less than a public company because they don’t seem to have the quarter-to-quarter challenges and shareholder scrutiny,” Mr. Reilly says. “They’re able to fly under the radar a bit more.”

©2010 by Crain Communications Inc.

Baptist Health System to Build New Hospital in New Braunfels – Will a Two Hospital Town Breed Competition?

Monday, March 15th, 2010

Baptist Health System says it has purchased a 56-acre parcel of land on the northeast corner of Interstate 35 and Loop 306 in New Braunfels where it plans to build a full-service hospital.

Officials with the San Antonio-based health care system say the new hospital will cost between $85 million and $115 million to develop and will be situated near the new Town Center at Creekside mixed-use development.

“The tremendous growth in Comal, Guadalupe and Hays counties has meant an increase in demand for medical services,” says Baptist Health System President and CEO Graham Reeve.

“With its location near two major roadways, the new hospital will provide greater access for area residents to a full range of medical services, specialist physicians and top-flight programs like the Baptist Brain & Stroke Network,” he adds.

Comal County is expected to almost triple in size by the year 2040.

“We’ve been working with Baptist leadership for some time to realize this important addition to our community,” says Dr. Mark Hickman. “As a physician, resident and board member of the New Braunfels Economic Development Foundation, I know that it’s important for our growing community to have choice and access to care where we need it most.”

Michael Meek, president of the Greater New Braunfels Chamber of Commerce, says the development of a new hospital is essential.

“Proximity to high-quality hospital services is often a top site-selection factor for expanding and relocating businesses,” he says. “Our community has identified additional medical services as a major goal and this decision will bring additional economic impact to the area and services nearer to our residents.”

Baptist officials say the new hospital will provide comprehensive acute-care, medical and emergency care, as well as cardiovascular and neonatology services.

It is not clear at present how many beds the new hospital will house. But Baptist officials say the project is expected to completed in 2012.

Baptist Health System is owned by Nashville-based Vanguard Health Systems. It is affiliated with the Baptist General Convention of Texas and operates five faith-based, acute-care hospitals in the San Antonio market.

PPO Organizatons Have Moved to the Side of the Hospitals

Sunday, March 14th, 2010

The Phia Group and AMPS Comment on CNN Report On Outrageous Hospital Charges

MyHealthGuide Source: AMPS and The Phia Group, 3/9/2010, and

CNN report:

Atlanta, GA — CNN aired a report by reporter Elizabeth Cohen on inappropriate charges by hospitals for various items used for patient care. Among the examples cited were a single toothbrush billed at $1,000 and a single Tylenol caplet billed for $140. The report details how these are not isolated incidents, but rather part of how hospitals regularly bill patients and insurance companies. Mike Dendy of AMPS and Adam Russo of Phia have responded to this report.

“Egregious charges like those described in the CNN report are much less of an anomaly than most payers think,” commented Mike Dendy, President and CEO of Advanced Medical Pricing Solutions. “Our observation is that perhaps the hospital that charged for 41 bags of solution (but only used 1) may be expecting payment in full because the charge was for an in-network service where they had a contract that calls for payment without an external audit,” added Adam Russo, CEO and Founder of Phia.

“This and thousands of other examples we have in our data base provide a clear sign that smaller payers that use rental PPO networks need to consider alternatives to the PPO model and move on to other forms of cost containment,” continued Dendy. Russo stated that, “Many self-funded employee benefit plans have language in their plan documents that specifically allow for claims to be audited and paid on usual, reasonable, and customary terms, but most PPOs do not allow for this to occur. If these benefit plans follow the terms of the plan document, in many cases an audit of itemized charges will violate the terms of the PPO agreement and  our industry needs to do something about this.”

A Wall Street Journal article published on January 30th reported that Hospital Corporation of America (HCA) paid out a $1.75 billion dividend to their investors for 2009 results. The Journal notes the payout to be among the biggest ever.

“For the most part, PPO organizations have moved to the side of the hospitals,” commented Dendy. “PPO organizations are using the contracts that they believe smaller payers must have to force undue payments from employer groups who are unaware of what they are paying for. AMPS’ reviews of hospital billings often show overcharges to be in the 18-20% range on well over 90% of the bills we audit. With hospital charges equating to approximately 40% of an employer groups costs, hospital overcharges alone account for 8% of an employers’ total expense. AMPS’ findings are remarkably consistent with the RAC audits being performed on Medicare claims.”

About AMPS

Founded in 1995, AMPS now has offices in Atlanta, GA; Chattanooga , TN; and Phoenix, AR. AMPS’ reviews have yielded an average cost savings on adjusted hospital claims of 20.55% (over and above PPO discounts). With an average size of claim reviewed of $51,365, this has yielded an average additional dollar reduction of $10,986 per claim. AMPS average success (hit) rate on claims greater than $15,000 reviewed is 90.5%.  Call Jim Delaney, COO, at 678-528-3041 and visit

About The Phia Group

The Phia Group, headquartered in Braintree, MA, represents third party administrators, self-insured companies, insurance carriers, reinsurers, and other at-risk entities across the country. The company’s services include subrogation, claim reimbursement, overpayment recovery and coordination of benefits. The Phia Group has become one of the fastest growing subrogation companies in the nation. Call 888-986-0080 and visit

Editor’s Note: This article targets rental PPO networks but should have been targeted to all PPO networks as they are all essentially the same.


Valley Baptist Hospital Sues Insurance Agent – Update

Saturday, March 13th, 2010

In May 2008 Valley Baptist Medical Center in Harlingen, Texas sued a local insurance agent. Below is an article that appeared in the Valley Morning Star newspaper on May 1, 2008 breaking the story:

A local hospital chain filed a major multi-million dollar lawsuit against an insurance broker for fradulent practices.

Reprsentatives for the Valley Baptist Health System allege that the local hospital chain was swindled out of more than $2 million dollars for insurance policies that didn’t exist.

A 47-page lawsuit filed in a Cameron County state district court outlined alleged acts of deception, fraud and theft.

Valley Baptist Health System alleges insurance broker Michael Swetnam, Jr. sold them several policies worth millions.

Swetnam Insurance reportedly sold Valley Baptist hurricane policies from 2006 to 2008 for about $2 million dollars.

The policies were terminated last year when a new insurance company took over.

The new company alerted hospital officials to red flags in the paperwork that could possibly be criminal activity.


Attorneys for the defendents have asked the presiding judge to postpone the trial to April 19, 2010 due to attorney conflict in scheduling.

Court documents on file with the court include the government’s Exhibit List which includes, among other things, the following – Check from Valley Baptist to Swetnam Insurance Services for $2,380,638.42; Bank Statement and Deposit Ticket to Swetnam’s account, $2,380,638.42. Cashier’s Check for $250,000 Payable to Brent A. Carter; Cashier’s Check for $250,000 Payable to Joe N. Reagan; Cashier’s Check for $250,000 Payable to David R. Smith; Cashier’s Check for $150,000 Payable to Michael N. Swetnam; Bank Statement and Deposit Ticket to Swetnam’s Account showing Cashier’s Check from Swetnam to B.A.Carter for $290,242.12, Cashier’s Check from Swetnam to D.R.Smith for $290,242.12; Invoice from Swetnam to Valley Baptist for $2,521,059.00; Check #xxxxxx from Valley Baptist to Swetnam Insurance Services for $2,521,050.00; Cashier’s Check from Swetnam to Brent Carter for $274,040.00; Cashier’s Check from Swetnam to David Smith for $274,040.90 – These are only a few of the exhibits listed in court documents.

Otra Vez!

Saturday, March 13th, 2010

   Arnulfo “Half Guilty, Half Pregnant” Olivarez

Half Guilty, Half Pregnant Arnulfo C. Olivarez, admitted felon, has had his sentencing postponed again. Sentencing is now set for June 25, 9:30 in Federal Court, McAllen, Texas , Hon. Ricardo Hinojosa presiding.

Oliverez has plead “half” guilty to bribing public officials in exchange for lucrative group health insurance contracts worth millions of dollars. Despite his guilty plea, the Texas State Board of Insurance website still shows Olivarez as an insurance agent in good standing.

Editor’s Note: For additional information, type in “Olivarez” in search box to review prior postings.

  New Vacation Home?

Protected: Upcoming San Antonio Seminar – How to Reduce Employee Health Care Costs by Improving Benefits – Secrets Insiders Dont Want You to Know. By INVITATION ONLY

Friday, March 12th, 2010

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Michigan Communities Sue Blue Cross Over Fees

Thursday, March 11th, 2010

DETROIT, Nov. 1 (UPI) — A group of Michigan communities say Blue Cross Blue Shield of Michigan overcharged them by tacking on $40 million in hidden fees.

While 12 local governments have joined a lawsuit against the insurer, attorney William Horton told Sunday’s Detroit News that than 1,000 government bodies may have unknowingly paid the fees since 1994, the year that Blue Cross changed its billing practices.

Horton contends Blue Cross 15 years ago started intentionally hiding tacked-on administrative fees.

Blue Cross spokeswoman Helen Stojic told the newspaper the fees were not hidden and have allowed the governments to realize a savings, saying, “The disputed fees were specifically referenced in each of these groups’ contracts.”

But Horton reportedly disputed that, saying the contract language is so complex only Blue Cross officials could understand it.

The News said the suits have come after a settlement was reached last fall by Oakland County and Blue Cross regarding the fees, in which the county was paid $650,000 in cash and will receive three years of free administration by the Blues.

© 2009 United Press International, Inc. All Rights Reserved.
Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI’s prior written consent.

Thursday, March 11th, 2010

Suit alleges ‘secret’ insurance fees

Jan. 7, 2010

SAGINAW, Mich. – Government and school officials in Saginaw have filed suit against Blue Cross Blue Shield of Michigan, alleging the insurer overcharged them a combined $7 million in hidden administrative fees, according to The Saginaw News.

Saginaw County, the city of Saginaw and Saginaw Township Community Schools are self-insured, but contract with BCBS to manage health insurance premium funds, The News reported. The fees were imposed in 1994, but didn’t come to light until 2008, court documents said, according to The News.

A BCBS spokeswoman told The News that the fees were “expressly authorized” by contract and that the amount the city, county and schools saved on handling of hospital claims “far exceeded” the fees.

The county and school district filed suit in Saginaw County Circuit Court, alleging overcharges of $4 million and $1.8 million, respectively. The city is part of a lawsuit filed in Genesee County Circuit Court; it is seeking more than $1 million, according to The News. Lawyers want to make the city’s case a class action lawsuit along with the Genesee County Road Commission and Tuscola and Cass counties, The News reported.

Saginaw County Circuit Judge Fred L. Borchard declined to dismiss the school and county suits, saying the contract language was “ambiguous,” The News reported.

In a settlement with Oakland County, BCBS agreed to pay $650,000 and provide three years of free administration of Oakland’s self-insured plan, The Detroit News reported in November.

The Saginaw News, “Saginaw, Saginaw County and Saginaw Township schools sue Blue Cross/Blue Shield over bills for $7 million in ‘secret’ fees,” Jan. 7, 2010

Mackinac Center for Public Policy, Michigan School Databases, “Health Insurance by School District.”

Editor’s Note: See previous posting “4% Hidden Fee Basis of Lawsuit.” (type in search box on this site) for a copy of the pleading in this most interesting case.

What is Driving Health Care Costs?

Wednesday, March 10th, 2010

A. Insurance Companies

B. Sick People

C. Hospitals and Doctors

According to a recent article in the March 1, 2010 Business Insuance, “Clout of Health Care Providers Drives Costs”, the answer is “C”.

“The report, to be published in the April edition of policy and research journal Health Affairs, traces how consolidation of hospital’s and formation of independent physician practice associations in California during the past decade have strenghtened provider’s bargaining power with health plans, leading to higher premiums in that state.”

National Hospital Chain Threatens South Texas Employer

Wednesday, March 10th, 2010

Molly Mulebriar, our in-house investigative reporterette, received a telephone call yesterday from one of her trusted sources who informs that a national hospital chain, upon learning that a large private employer in South Texas was transitioning their traditional group medical employee welfare program from a PPO plan to a cost-plus hospital reimbursment plan, threatened to shut the door on employees seeking future medical treatment at their facilities. The caller (from the hospital’s corporate headquarters) told the employer that the call was simply a “courtesy call” to let the employer know in advance.

If  true, the public should be outraged.

Molly Mulebriar has attempted to contact the local chapter of the Mafia to confirm this story. Bruno, the receptionist who took her call, promised to get back to her expeditiously.

Editor’s Note: Hospitals, PPO’s and certain insurance companies are worried about the growth of cost-plus hospital reimbursement plans in Texas. The concept is catching on fast amongst cash strapped employers.

Thank You Chicago Visitors!

Saturday, March 6th, 2010

We wish to thank the many visitors from Chicago who have been regular visitors of in the past 30 days.

Do Insurance Companies Bribe Insurance Agents?

Saturday, March 6th, 2010

In an earlier posting, “Why Insurance Agents Fear Insurance Companies”, the point was made that there appears to be an inherent conflict of interest on the part of insurance agents representing carriers on behalf of their clients who pay them.

Agents and brokers who represent insurance companies have Producer Contracts which outlines each party’s duties and responsiblities. Common to all of these contracts is the carrier’s right to terminate the contract with as little as a two week notice, without cause.

As a result, a carrier can arbitrarily terminate a contract without cause at any time. The independent agent who places business with them over time, immediately loses commission dollars upon termination, in most cases. In truth, the client who is paying the insurance premium is in fact paying the agent, albeit indirectly. Yet, it is the insurance company who has “Veto Power” over the client as to whether the client’s insurance agent (representative) gets paid. So, who does the agent really work for, the insurance company  who controls his paycheck or the client who is paying the bill?

Insurance agents attempt to protect themselves by convincing the carriers that they have “control” of their accounts. “If you terminate my contract, I will move my client to ABC Insurance Company” is an unspoken threat employed with some success.

A wise insurance agent should work on a fee basis to be paid directly by his client, rather than rely on the whims and wishes of the insurance company and their employees. But, there is a big problem with doing that in the eyes of may insurance agents and brokers; to do so would expose the compensation paid to the agent, something that could end up as being an embarrasing thing to explain, and maybe even hard to justify in the eyes of the employer paying health insurance premiums that may be costing him up to 15% of his total payroll.

Some insurance companies have developed control of insurance agents to an art form. They know how to cement “loyalty” by controlling a well constructed honey-pot with various forms of revenue streams strategically placed within insurance contracts with third party vendors.

But, these strategies may now be in jeopardy.

With the new ERISA disclosure requirements for 2009 reporting purposes, carriers are scrambling to comply. Some are issuing memorandums to their agents and their clients announcing the new reporting requirements and their intent to provide direct and indirect compensation figures as required. Some are not, as yet.

Money influences behaviour. A bribe is a form of influencing behaviour. Are insurance companies guilty of influencing insurance agent and broker behaviour? 

Editor’s Note: We know of many instances wherein insurance companies have terminated agent contracts without cause and then assign a “friendlier” agent to handle the account. We have had one insurance company representative brag that he was in the process of terminating John Doe’s contract because “he doesnt give us a fair shot at new business.” And, it is the big brokerage houses that have the most to lose in upsetting insurance companies; they have enormous bonus and profit sharing arrangements which they fear would go away at any time if the carrier so desired.

Hussein Rallies the Troops – Vast Email Blast Sent

Friday, March 5th, 2010

From: President Barack Obama <>
Subject: A final vote on health reform
Date: Wednesday, March 3, 2010, 2:21 PM

Biff –Last Thursday’s first-of-its-kind summit capped off a debate that has lasted nearly a year. Every idea has now been put on the table. Every argument has been made. Both parties agree that the status quo is unacceptable and gets more dire each day. Today, I want to state as clearly and forcefully as I know how: Now is the time to make a decision about the future of health care in America.

The final proposal I’ve put forward draws on the best ideas from all sides, including several put forward by Republicans at last week’s summit. It will put Americans in charge of their own health care, ensuring that neither government nor insurance company bureaucrats can ration, deny, or put out of financial reach the care our families need and deserve.

I strongly believe that Congress now owes the American people a final vote on health care reform. Reform has already passed the House with bipartisan support and the Senate with a super-majority of sixty votes. Now it deserves the same kind of up-or-down vote that has been routinely used and has passed such landmark measures as welfare reform and both Bush tax cuts.

Earlier today, I asked leaders in both houses of Congress to finish their work and schedule a vote in the next few weeks. From now until then, I will do everything in my power to make the case for reform. And now, I’m asking you, the members of the Organizing for America community, to raise your voice and do the same.

The final march for reform has begun, and your participation is crucial. Please commit to join with me to take reform across the finish line.

Essentially, my proposal would change three things about the current health care system:

First, it would protect all Americans from the worst practices of insurance companies. Never again will the mother with breast cancer have her coverage revoked, see her premiums arbitrarily raised, or be forced to live in fear that a pre-existing condition will bar her from future coverage.

Second, my proposal would give individuals and small businesses the same choice of private health insurance that members of Congress get for themselves. And my proposal says that if you still can’t afford the insurance in this new marketplace, we will offer you tax credits based on your income — tax credits that add up to the largest middle class tax cut for health care in history.

Finally, my proposal would bring down the cost of health care for everyone — families, businesses, and the federal government — and bring down our deficit by as much as $1 trillion over the next two decades. These savings mean businesses small and large will finally be freed up to create jobs and increase wages. With costs currently skyrocketing, reform is vital to remaining economically strong in the years and decades to come.

In the few crucial weeks ahead, you can help make sure this proposal becomes law.

Please sign up to join the Organizing for America campaign in the final march for reform:

When I talked about change on the campaign, this is what I was talking about: coming together to solve a huge problem that has been troubling America for 100 years and standing up to the special interests to deliver a brighter, smarter future for generations to come.

I look forward to signing this historic reform into law. And when I do, it will be because your organizing played an essential role in making change possible.

Thank you,

President Barack Obama

Editor’s Note:  Put this picture in the Oval Office

SBA Email Alert

Friday, March 5th, 2010

SPBA Email Alert: – March 3, 2010

Health Reform Insights & Talking Points
Personal observations from SPBA President Fred Hunt

You are probably multi-tasking right now; reading this and listening to the President at the same time.  This is a reality check and to put into context what you are hearing.  All the pieces in the earlier e-mails still apply. This just describes some new twists that are taking place and the timetable.

Whether the President will actually say it or not, the Democrats now have a time schedule to pass health reform.  So, I’ll give you the dates and the reality-check factors of each.

By March 19th:  Target for House to vote to pass the mega Senate bill and send it  directly to the President, and it gets signed into law in 24 hours.

Reality check:   Many House Democrats strongly dislike portions of the Senate bill, so this is a giant leap of faith to go on record voting for things you hate, and especially since some divisive provisions, such as abortion & immigration almost certainly can not be rationalized as “budgetary” and thus put into a Reconciliation bill (though VP Biden, as President of the Senate, is ultimate  decision power of what can be in the Reconciliation bill).

So, Speaker Pelosi has said that the House won’t go out on this limb unless they have a letter signed by at least 50 Senators committing to pass a mutually-agreeable “tweaks”…meaning the same Reconciliation as the House passes + perhaps  another bill for changes that can’t be done via Reconciliation, although Pelosi has quietly indicated that abortion & immigration (issues with strong opinions in both chambers) might be dropped.  It is hard to imagine 50 Democrat Senators blindly saying they’ll vote for something not yet drafted.

By March 21st:  The House drafts a reconciliation bill to “clean up” (change things they don’t like) in the just-passed Senate version.  The wording of the Reconciliation is a delicate mine field. The changes the House would want are significant (such as public option), but what the Senate is apt to accept is minimal.  So, we are right back where we were last August as far as unsolvable disagreements.

Legislative Counsel says that the President’s health reform proposal (fleshed-out version of the outline at the Summit ) can not be introduced until the Senate mega version is passed by the House, so the Obama version is planned to be in the Reconciliation bill.

By March 23rd:  The Senate begins debate on the (House-drafted) Reconciliation bill.  Debate is limited to 30 hours, but unlimited amendments may be proposed, so this stage could drag out for weeks.

March 26th (the start of the Congressional Spring Recess) is the target to vote on Reconciliation.  The Democratic leaders’ goal is to get something voted (so Congressmen can’t later back down) before Congressmen go home and face voters during the Spring recess.

This is based on LOTS of wishful thinking, such as:

(1).  Will both liberal & conservative House Democrats who have strong problems with the mega Senate bill (but would demand opposing changes) be willing to make a flying leap of faith to, in effect, vote the mega Senate-passed health reform directly into law??  If Reconciliation or other attempts to make changes later stall, the House members would feel like chumps.   House members are already nervous sticking their necks out and making votes first on this explosive issue in an election year, leading into a home recess with voters, and knowing that the slower Senate process can drag out for weeks or months.

(2).  Will 50 Senators sign a document blindly promising to pass whatever Reconciliation bill the House comes up with?  That’s highly doubtful, even if this was not full of issues divisive among Democrats.

(3).  Will House & Senate be able to agree on word-for-word twin Reconciliation bills?

(4).  Will having the Obama version inserted into the process (and bitterness from many Democrats that Obama seems ready to accept 4 suggestions from Republicans while dumping key items of Democrats, such as public option and cost controls) smooth or muddy the Reconciliation and general legislative process on this?

(5).  Since the House & Senate barely had enough votes to pass their versions of the mega bills, is there any sign that some Democrats who voted “no” last time might be willing to now vote “yes” for the strategy described above?  The answer is yes.  For example, in the House, the following 9 Democrats who voted no before are rumored to be reconsidering and may vote “yes”.  So, Pelosi’s challenge to get enough votes to pull this off is much closer now than a couple of weeks ago.  Baird-WA + Boucher-VA + Gordon-TN + Kosmas-FL + Kravotil-MD + McMahon-NY + Murphy-NY + Tanner-TN

Other tidbits of news:

>>When advisors to a President start protecting their own reputations at the expense of the President (so as not to look like a loser) it is an indication that the bloom is off the rose of the Presidency and people who want to protect their reputations as political wizards want to distance themselves from what they think may be going down the tubes.  A series of articles praising Rahm Emmanual and leaving an unflattering view of Obama and his White House team is being interpreted as a giant sign.  Also, Tom Daschle, who was one of the key architects of the Obama health reform effort, is now bemoaning that it lacks cost controls.

>>Some ardent supporters of health reform, such as Health Care for American Now (HCAN) are shifting to guerilla warfare against AHIP, insurance companies, and even individual insurance execs.  The goal is to create the political correctness view that AHIP and its members are evil and “illegitimate”.  So, HCAN will try to disrupt the AHIP convention, picket insurance companies and even the homes of some insurance executives.

>>Bill Clinton’s stents recently got great praise from the press as a wonderful quick procedure when the former President had a heart scare.  However, whether stents are cost-effective is strongly debated.  If a health reform effectiveness panel were created to determine what would and would not be covered, stents (and/or other current popular procedures) might well end up dropped.  So, this is an interesting case example.  We know this worked for Mr. Clinton, but what if, next time, stents are not an approved option?

>>Democrats love to talk about Republicans in health care.  The story lines are that Republicans are the big obstacle to everything.  President Obama announces today that he is “exploring” 4 Republican ideas into his proposal (HSAs + medical malpractice + Medicare fraud & waste + addressing disparities among states in payments to providers by Medicaid).

However, as readers of these e-mails know, month after month the fierce battles are Democrat versus Democrat.  I just mention this as a reality check that when all sides are trying to hype their version of history, remember the truth.  It was not evil Republicans masterminding defeat for this health reform.  It was deep (and usually sincere) divisions within the Democrats.


What Exactly is “Eligible Indirect Compensation?”

Friday, March 5th, 2010
In the Know - Blue Cross and Blue Shield of Illinois


March 3, 2010

Note: This article was originally published in the Feb. 17 special edition of In the Know.
BCBSIL Sending NEW Reports Regarding ERISA Form 5500 Filings [Group Markets]
(The information below relates only to customers who are required to file an ERISA Form 5500. Please inform your clients this week about the pending mailing. You can disregard if none of your customers are required to file an ERISA Form 5500.)

As you’re aware, Blue Cross and Blue Shield of Illinois (BCBSIL) has communicated to all of our group customers that beginning with the 2009 Plan Year, the Department of Labor, the Department of the Treasury, and the Pension Benefit Guaranty Corporation have published new requirements pertaining to the ERISA Form 5500 report.

To assist your customers in complying with the new regulatory requirements regarding the types of reportable “indirect monetary and non-monetary compensation,” BCBSIL will send two new reports to customers who are subject to the ERISA Form 5500 filing requirements. Customers should start receiving these reports in the mail within the next several weeks. These new reports are in addition to the original ERISA Form 5500 Information Report that has been sent annually and will be mailed separately. The content and the timing of the original ERISA Form 5500 Information Report have not changed.

Prior to the mailing of the two new reports, a letter will be sent to customers providing them with additional information about the content provided in the new reports.

Following are details about the new reports, which will be mailed together:

ERISA Form 5500 Supplemental Information Report

The 2009 Supplemental Information Report will contain an estimate of non-monetary compensation in the form of meals, entertainment, gifts and meetings provided by Health Care Service Corporation (HCSC), a Mutual Legal Reserve Company, including Dental Network of America, Inc. to customers and producers in relation to the customer’s business.  

This report will be automatically sent to Prospective Premium group customers with more than 100 enrolled employees, all Retrospective, Minimum Premium, Cost-Plus and ASO group customers, as well as any other group customer that received an annual ERISA Form 5500 Information Report last year. Excluded from the mailing will be any group customers who have previously communicated that they are ERISA exempt.

The amount of non-monetary indirect compensation included in the Supplemental Information Report will be an estimated amount. It will not be the exact amount spent on each customer or on each producer relative to each customer. The actual amount spent per customer or per producer may be greater or lesser than the estimated amount shown in the report. Expenses may be allocated to a customer or to a producer even if none was actually received. In some cases the actual amount may be zero.

The estimated non-monetary compensation will be calculated by first aggregating the non-monetary expenses associated with customers and producers by block of business (Small Group, Large Group, Labor, etc.). The block of business totals will be divided by the number of enrolled lives in the block. The resulting amount will be the Average Expense per Enrolled Life for the block. Each customer will be associated with one of the blocks of business. The customer’s estimated amount will be calculated by multiplying the customer’s enrolled lives by the Average Expense per Enrolled Life for the block of business in which the customer is classified. Customers with fewer enrolled employees will receive smaller non-monetary expense totals and customers with more enrolled employees will receive larger non-monetary expense totals. The detailed description of the calculation will be listed in the footnote to the Supplemental Information Report. An estimation methodology is allowed for reporting purposes per the Department of Labor guidance on the revised legislation. (Note: Expenses with a unit value of less than $10 were excluded from this report.)

The indirect non-monetary compensation provided by HCSC for miscellaneous gifts, meals, entertainment and meetings will be reported to the customer as a single line item per recipient (customer and producer(s), if applicable). There will be no itemized expenses and no change to the calculation of the previously reported Special Commissions.

2009 ERISA Disclosure Information Report

The 2009 ERISA Disclosure Information Report will be sent to ERISA Group Customers that have purchased Minimum Premium, Cost-Plus funded plans, or self-insured (ASO) services. This information will also be available, upon request, for customers with other funding arrangements. The 2009 ERISA Disclosure Information Report will be included in the same mailing as the 2009 Supplemental Information Report.

The 2009 ERISA Disclosure Information Report contains information about Health Care Service Corporation, our corporate structure and the companies it uses to assist in delivering services to our group customers. In the past, much of this information was provided to these customers through a variety of channels, including marketing materials, Web sites, RFPs, contracts, reports, and other communications.

Included in the 2009 Disclosure Information Report is also detailed information that we believe meets the requirements for Eligible Indirect Compensation (EIC) under the new ERISA regulations. We are providing this information to these customers because a plan administrator’s reporting requirements on Schedule C to the Form 5500 Report are streamlined if the requirements for disclosure of EIC are met. Please note that the amounts that are included as disclosures in the 2009 Disclosure Information Report will NOT be included in the annual Form 5500 Information Report. The content and the timing of the original Form 5500 Information Report have not changed.

HCSC is required to provide certain information to our customer groups and they may receive more information than they actually need, depending on their specific Form 5500 reporting requirements. Your customers should consult their own advisors and legal counsel to determine how the new reporting requirements may apply to their organization.

If your customers are required to file an ERISA Form 5500 and have not received the new reports by the end of March, or they need more information, please contact your BCBSIL account representative.

See FAQs for more detailed information.

Review sample employer letter with Form 5500 Supplemental Information.

Review sample employer letter with Form 5500 Supplemental Information and 2009 ERISA Disclosure Information Report.

A Division of Health Care Service Corporation, a Mutual Legal Reserve Company,
an Independent Licensee of the Blue Cross and Blue Shield Association.

Editor’s Note: BCBS of Illinois has sent out this Second Notice to their producers. Why? Are producers concerned about new compensation disclosure rules? Are employers concerned too? Could this be a case of sending out a Memorandum intended to inform but turns out to be a Memorandum that brings to mind more questions than answers?

Will This Man Make or Break ObamaCare?

Monday, March 1st, 2010

This man is rumored to be the Wild Card in passage of ObamaCare – Can you imagine the power he welds now? He may make the Louisiana Purchase appear to be peanuts compared to what he can get for his back water state.

 What do I know, Im only a dog

Back To The ObamaCare Future – Wall Street Journal 1 March 2010

Monday, March 1st, 2010
Natural experiments are rare in politics, but few are as instructive as the prototype for ObamaCare that Massachusetts set inmotion in 2006. The bills for “universal coverage” are now coming due, and it appears the state political class is prepared to

do lasting damage to one of America’s top-flight health-care systems.

Last month, Democratic Governor Deval Patrick landed a neutron bomb, proposing hard price controls across almost all

Massachusetts health care. State regulators already have the power to cap insurance premiums, which Mr. Patrick is

activating. He also filed a bill that would give state regulators the power to review the rates of hospitals, physician groups and

some specialty providers. Those that are deemed too high “shall be presumptively disapproved.”

Mr. Patrick ad-libbed that he had “a whole bunch of pals here who are in the health-care field, and I saw the color drain out

of their faces.” Little wonder. The administered prices of Medicare and Medicaid already shift costs to private patients while

below-cost reimbursement creates balance-sheet havoc among providers. Now the governor wants to import these

distortions to save the state’s heavily subsidized insurance program as costs explode.

It doesn’t even count as an irony that former Governor Mitt Romney (like President Obama) sold this plan as a way to

control spending. As with all new entitlements, the rolling cost crisis began almost immediately. For fiscal 2010 taxpayer

costs are $47 million over budget, in part due to the recession, and while the $913 million Mr. Patrick requested for 2011 is a

5% increase over 2010, spending has grown on average 6.7% per year.

Meanwhile, average Massachusetts insurance premiums are now the highest in the nation. Since 2006, they’ve climbed at an

annual rate of 30% in the individual market. Small business costs have increased by 5.8%. Per capita health spending in

Massachusetts is now 27% higher than the national average, and 15% higher even after adjusting for local wages and

academic research grants. The growth rate is faster too.

Those data come from granular studies about the Massachusetts health markets published recently by the state. Not that

anyone on Beacon Hill seems to have to read them, judging by their policy proposals. Besides Mr. Patrick’s latest inspiration,

last year a blue-ribbon commission endorsed a “global budget”—i.e., an arbitrary government limit on medical spending,

with politics shaping what gets covered and what doesn’t.

As in Washington, the political class and providers blame insurers, but a better culprit is the state’s insurance regulation.

Incredibly, the average “medical loss ratio” in Massachusetts for individual policies is 112%—that is, insurers pay $1.12 in

benefits for every $1 in premiums.

This is the direct result of forcing insurers to charge everyone more or less the same rate regardless of age or health status,

which makes it rational for people to wait to enroll until they need expensive coverage. It is also the result of the state’s

decision to merge the individual and small-group insurance markets, which transfers individual costs onto small businesses.

Mr. Patrick actually justified his plan by citing small-business costs.


Another reason costs are so high is that state regulations have mandated that insurance coverage be far richer than the rest

of the country. The average insurance deductible is 28% lower than the U.S. average, and the benefits are more generous

with less cost-sharing. Patients are thus insensitive to the cost of care.

The insurance industry points the finger back at providers, given that over the entire Massachusetts market they usually

spend 88 cents of every premium dollar on claims. But the Bay State medical system isn’t wasteful by any of the fashionable

measures. The Dartmouth Atlas that measures regional variation in the supposed “overuse” of care ranks the state near the

U.S. middle.

Though some large hospital systems, especially in Boston, have the market power to drive prices higher, the state’s own

reports mainly show that the dominant reason health costs are rising is medical progress and technological innovation.

Massachusetts health care, with its abundance of academic medical centers and high-quality specialists, is the envy of the


This is the true target of Mr. Patrick’s price controls: The goal is to engineer a cheaper system through brute force so

government can pay for health care for all. What inevitably suffers is the quality of care for individual patients. Thirty states

imposed hospital rate setting in the 1970s and 1980s. Except for Maryland, every one of them eventually eliminated it—

including Massachusetts, in 1991—partly because it didn’t control costs.

And partly because it killed people. A 1988 study in the Journal of New England Medicine found that the states with the most

stringent rate-setting had mortality rates 6% to 10% higher than those that didn’t.

All of this is merely a preview of what the entire country will face if Democrats succeed with their plan to pound ObamaCare

into law in anything like its current form. Massachusetts is teaching the country a valuable lesson in how not to reform

health care, if only anyone would pay attention.

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