Archive for November, 2010

The Fallacy of Bidding Out Self-Funded Health Plans To Save Money

Tuesday, November 30th, 2010

Many political subdivisions within Texas self-fund their group medical plans. In fact, most choose this financing method over purchasing fully-insured cover from a carrier. The choice seems obvious: self-funded group medical plans save money.

Or do they?

With the need to bid out their health insurance plans, cities, counties and school districts bid out everything except the component that drives 100% of their risk. They bid out third party adminstration services, PPO access, Rx administration and stop loss insurance. All these services account for as little as 10% of the Plan’s total cost.

What about the other 90% of Plan costs? Why don’t political subdivisions bid out that too?

Because they are ignorant, or just naive. Or, they trust their advisors who are ignorant or naive.

Political subdivisions should bid out provider costs too. They should invite interested hospitals and doctors to bid for the Plan’s substantial assets. Providers will compete for business, as has been proven by such groups as Bill Miller Bar B Q (Bill Miller Forbes), Tyler Independent School District, Blue Bell Creameries, San Patricio County, Texas Med Clinic, and many more progressive employers whom we have had the pleasure of working with in the past three years.

The problem is that political subdivisions have never bid out the dominant risk factor of their plan and instead have historically  “gifted” public funds through intermediaries who have negotiated secretive contracts with health care providers. See Health Care Strategies for Texas Political Subdivisions.

This is upside down.

First Step In Eliminating The Broker? Encourage Clients to Deal Direct & Bypass Broker?

Tuesday, November 30th, 2010


New Customer Service Enhancement Set for Texas  

Beginning December 1, an enhanced customer service experience called UnitedConnect will be available for our customers in Texas who have up to 99 eligible employees and who have held at least one policy with us for three or more consecutive years. Eligible small business customers who choose to use the UnitedConnect service will be connected immediately with a customer service representative who will handle their call from beginning to end, no matter what the issue or concern.  

The UnitedConnect team can be contacted via phone at 1-877-634-0267 from 7 a.m. – 7 p.m. Central Time and via email at

This new service model compliments our current broker models including the Platinum Dedicated Client Service Managers, Gold Broker & Elite, and the General Agent Service Teams. These models will remain intact and will operate as they do today. You may elect to tell your clients to continue to contact you directly, or you can extend the UnitedConnect team to your eligible clients.

Customer Communications
Starting in early December, we will be sending all eligible Texas small business customers a letter announcing the availability of UnitedConnect. 

Contact your UnitedHealthcare account representative for more information or with any questions about UnitedConnect.

The Beginning of The End of Employer Sponsored Health Insurance?

Tuesday, November 30th, 2010

WASHINGTON – Job-based health care benefits could wind up on the chopping block if President Barack Obama and congressional Republicans get serious about cutting the deficit.

Budget proposals from leaders in both parties have urged shrinking or eliminating tax breaks that help make employer health insurance the leading source of coverage in the nation and a middle-class mainstay.

Editor’s Note: If group health care costs the employer about 8-10% of payroll, and becomes taxable, then would it not be better for the employer to drop his health plan and pay the employees an additional 8-10% in pay. After all, employee wages are tax exempt to the employer and is another line item in the cost of doing business.

Justice Delayed Again – Are The Feds Inept?

Monday, November 29th, 2010

   At 2:00 pm cst, Judge Hinojosa’s court was packed with spectators. The sentencing of Half Guilty, Half Pregnant and admitted felon Arnulfo Olivarez was due. Yet, sentencing was delayed once again due to “legal technicalities” until late January 2011.

Seems the Feds can’t get their act together.

Editor’s Note: We predict that Judge Hinojosa will earn the name “The Hanging Judge” upon sentencing day. We expect lengthy prison sentences as well as significant fines to be imposed.

Half Guilty, Half Pregnant Rogue Insurance Agent To Be Sentenced Monday, November 29, 2010

Saturday, November 27th, 2010


Half Guilty, Half Pregnant and still licensed Texas insurance agent Arnulfo C. Olivarez is scheduled to be sentenced for his crimes on Monday, at 2:00 pm CST in Federal Court, McAllen, Texas, Judge Ricardo Hinojosa presiding.

Prior sentencing dates have been postponed over the past three years at least six times.

   Admitted felon Olivarez has plead guilty to bribing South Texas public officials in exchange for lucrative insurance contracts worth millions of dollars.

For more information, type in “Olivarez” in the search box on this blog to read prior postings. Also see

Editor’s Note: The Texas Department of Insurance website shows Olivarez recently renewed his insurance license –

Texas Administrative Code – Licensing of Convicted Felons –$ext.TacPage?sl=T&app=9&p_dir=P&p_rloc=148044&p_tloc=&p_ploc=1&pg=2&p_tac=&ti=28&pt=1&ch=1&rl=503

Admitted felon Arnulfo Olivarez currently represents the following insurance companies:

Company Active
AETNA DENTAL INC. 09/12/2000
AETNA HEALTH INC. 09/07/1999
BLUE CROSS AND BLUE SHIELD OF TEXAS – (Toll Free BCBSTX Integrety Tip Line 1-877-272-9741) 03/07/2002


Read about “The Rest of The Story” here:

Agent Compensation Statement – Your Fired!

Wednesday, November 24th, 2010

Health insurance agents earn commissions from the sale of health insurance policies. Over time, renewal commissions build up and provide an independent agent a “base salary” which provides for his or her monetary needs to pay mortgages, car payments, education for their children, living expenses, etc. And, renewal commissions on health policies are low, unlike the upfront first year commission paid by carriers to incentivize independent producers to bring in new business.

With ObamaCare, indepedendent health insurance agents will be cast aside. No longer will carriers be able to pay commissions and remain within the Minimum Loss Ratio requirement effective January 2011.

In a November 2010 Agent Compensation Statement, a major A+ Carrier put the following notice to their health insurance agents:

“Beginning 11-15-10 any commission transactions for major medical policies with effective dates of 1-1-2011 and after will be held. Commissions on all other lines will not be held and will process normally.”

Humana Buys Concentra – A Move To Workers Compensation Business?

Monday, November 22nd, 2010

LOUISVILLE, Ky.–(BUSINESS WIRE)–Humana Inc. (NYSE: HUM) today announced it has signed a definitive agreement to purchase Concentra Inc., a privately held health care company based in Addison, Texas, for approximately $790 million in cash. Through its affiliated clinicians, Concentra delivers occupational medicine, urgent care, physical therapy and wellness services to workers and the general public from more than 300 medical centers in 42 states. Nearly 3 million Humana medical members live near a Concentra center. In addition to its medical center locations, Concentra serves employer customers by providing a broad range of health advisory services and operating more than 240 worksite medical facilities.

“Concentra’s focus on evidence-based, cost-effective medical care and a service-driven culture parallels that of Humana and ultimately results in tremendous opportunity across the combined enterprise.”

“Concentra brings solid experience across a number of fronts that fit well with our consumer-focused strategy and will allow both organizations to provide a wide array of services to individuals needing access to convenient and affordable high-quality health care,” said Michael B. McCallister, Humana’s chairman of the board and chief executive officer. “We are excited about the opportunity to acquire a strong stand-alone business that reinforces our core businesses while providing both revenue diversification and opportunities for strategic expansion longer term.”

“This combination with Humana is an excellent opportunity to expand service to patients and employers, as well as enhance access to convenient medical care for patients in communities nationwide,” said James M. Greenwood, Concentra’s chief executive officer. “Concentra’s focus on evidence-based, cost-effective medical care and a service-driven culture parallels that of Humana and ultimately results in tremendous opportunity across the combined enterprise.”

Annual revenues for Concentra approximate $800 million. The transaction is subject to certain regulatory approvals and is anticipated to close in December 2010. Humana’s financial guidance for the years ending December 31, 2010 and December 31, 2011 exclude the impact of this pending transaction. Concentra is expected to be slightly accretive to Humana’s earnings for the year ending December 31, 2011.

Editor’s Note: American health insurance companies are seeking new opportunities – some are focusing on health insurance markets in China, India and other countries where free enterprise offers economic gain. The Humana purchase of Concentra signals entry into the Workers Compensation market in the United States, in our opinion. A good business decision it seems.

Health Insurance Agents Doomed – Carriers To Go Direct?

Monday, November 22nd, 2010

WASHINGTON, D.C., Nov. 22, 2010 — The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) expressed disappointment with the interim final rule on Medical Loss Ratios (MLRs) released by the U.S. Department of Health and Human Services (HHS) today. The rule includes agent and broker commissions as ‘non-claims costs’ when calculating an insurer’s MLR as part of the new health care reform law.

“The Big ‘I’ is disappointed with the interim final MLR rule, and we are extremely concerned that this rule will lead to severe market disruption, especially in the individual and small group markets,” says Robert Rusbuldt, Big “I” president and CEO.

Throughout the process, the Big “I” has urged the National Association of Insurance Commissioners (NAIC) and the HHS to exclude agent commissions from the MLR calculation. The Big “I” has argued that these agent commissions are passed 100% to third parties and are therefore pass-through payments that should not be included in the formula. While acknowledging the potential impact of the MLR standard on agents and brokers and including that impact as a factor in considering whether a particular individual market would be destabilized, HHS did not appropriately exclude agent commissions and fees from the MLR calculations.

“The Big ‘I’ is very concerned that the MLR provision of the new health care reform law will have a devastating effect on the private marketplace and that consumers will be negatively impacted,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs. “After hearing from various interested parties if HHS does not fix this language before the rule is final, we hope that Congress will step in and revise the MLR formula through the legislative process.”

Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, health, employee benefit plans and retirement products. Web address:

Major Texas Hospital System Agrees to Transparent Contract

Monday, November 22nd, 2010

A major Texas hospital system has agreed to a fully transparent hospital contract using Medicare base rates as the benchmark for all in-patient and out-patient claims. Payers (self-funded employers), for the first time,  will have direct access for full disclosure.

Competing payers such as the BUCA’s will continue to tout their “superior” discounts. However their continued refusal to show their clients actual contracts they have negotiatated with area hospitals will preclude payers from knowing the real truth about hospital costs.

Participating employers will be able to forecast their group health costs with a greater degree of accuracy as well as retain full audit rights.

For more information contact .

HealthSmart Introduces “Tribal Care” – Touts Medicare Like Rates

Sunday, November 21st, 2010

TribalCARE, powered by HealthSmart, is a major event for Tribes seeking to reduce healthcare costs while improving quality of life for all Native Americans. Only HealthSmart’s TribalCARE brings all the pieces and blends them into the product best suited — and ready today — for Tribal Communities.

Getting To Know TribalCARE

  • TribalCARE is a trademarked new service from HealthSmart (patent pending)
  • TribalCARE coordinates with Indian Health System (IHS) and 638 facilities to maximize the availability of Medicare Like Rates (MLR) for eligible Tribal Members
  • TribalCARE obtains IHS authorization, notifies the provider and coordinates payment to the provider at 40% to 65% MLR savings

Why Tribes?

In 2003, Congress approved the Medicare Modernization Act (MMA) permitting Tribes to obtain MLR for Tribal Members. However, few Tribes currently take advantage of this law due to a lack of understanding, specialized administration and a lack of service providers willing to work with IHS and 638s on obtaining MLRs.

HealthSmart ignited the MLR Tribal services industry and has a rich history of providing MLR services, Tribal healthcare claim processing and managed care services. TribalCARE was developed out of our experience in working with Tribes, processing claims and providing Medicare pricing expertise.

With TribalCARE, now all Tribes, including government and enterprise entities, have the opportunity to participate in Medicare Like Rate repricing.

Which Tribes?

Any Tribe may qualify. TribalCARE is available for all Tribal and Tribal enterprise self-funded plans. Our wellness and managed care services can also be tailored to best meet your specific Tribe’s needs, budgets and community healthcare priorities.

TribalCARE, Powered by HealthSmart, Offers:

  • MLR Reduced Rates on Eligible Services: Allows the Tribe to keep more of its money to use for other Tribal health-related priorities
  • Coordination With Tribal Sovereignty: Including the unique laws that apply to Tribal entities and coordination with your IHS or 638 facility to maximize funding and get the most out of your dollars spent
  • Enhanced Quality of Life: Access quality of life enhancing services designed to not only save Tribes more money, but also provide coaching for Tribal Members and work with them to develop healthy lifestyle changes

How It Works

TribalCARE works with the Tribe’s healthcare network, physicians and hospitals to provide reduced rates and increased access to life-enhancing services.

  • Pre-Cert / IHS Authorizations: TribalCARE coordinates with IHS, the doctor and the Tribe to ensure every eligible Tribal Member gets the MLR for eligible services
  • Claims Processing: TribalCARE ensures all claims are paid quickly and accurately to each provider for each MLR-eligible claim
  • Reporting & Accountability: TribalCARE provides detailed monthly reports denoting claim activities and the MLR claims along with Tribal savings from month to month

TribalCARE Benefits

  • Combines A Unique & Rare Solution
  • Delivers 40%+ Medicare-Like-Rate (MLR) Savings
  • Processes MLR & Commercial Claims
  • Offers each Tribal Group a Single Vendor / Single Contact

Editor’s Note: Reducing health care costs by paying “Medicare Like Rates” to providers? What a novel idea!

Dominant Hospital Systems Appear To Be Driving Community Healthcare Costs.

Friday, November 19th, 2010

Modern Healthcare (11/19, Evans, subscription required) “Private insurers pay significantly more to some hospitals than others within the same market and hospital prices vary widely across the US, a new study found.” The Center for Studying Health System Change “analyzed hospital rates as a percentage of Medicare rates across eight markets and results suggest some hospitals have market clout to raise rates.” The study “also found variation in outpatient payments for seven of the eight markets.”

        The Milwaukee Journal Sentinel (11/19, Boulton) reports that the analysis “looked at hospital and physician rates and was based on data from insurers Aetna, Anthem Blue Cross Blue Shield, Cigna and UnitedHealth Group. The markets were Milwaukee; Cleveland; Indianapolis; Los Angeles; Miami-South Florida; Richmond, Va.; San Francisco; and rural Wisconsin.” The health insurers included in the study “paid rates ranging from 167% to 333% of what Medicare pays for inpatient care and from 234% to 439% for outpatient care in the Milwaukee area.”

        The NPR (11/19, Rau) “Shots” blog reports, “The work by the Center for Studying Health System Change used actual insurance payments from four large insurers and benchmarked them against Medicare payments to take into account differences in cost of living and wages.” The results appear to “support the argument that some high-priced hospitals are getting the upper hand with insurers,” and “builds on previous work of the author, Paul Ginbsurg, making the case that regions with a few powerful hospital systems are able to negotiate much higher rates than places with a lot of competition.”

        The Indianapolis Star (11/19, Rudavsky) reports that Anthem’s Dr. David Lee pointed out that the presence of several “dominant hospital systems” only served “to really drive up the cost of healthcare for the entire community.”

        The Wall Street Journal (11/19, Mathews, subscription required) “Health Blog” reports that the American Hospital Association has called the analysis “too deeply flawed to be a usable policy tool,” and says that the various methods used by each insurer to generate the study didn’t definitively show that hospitals wield the clout to affect insurance rates.

        Modern Healthcare (11/19, Evans, subscription required) reports that AHA president and CEO Richard Umbdenstock called the analysis “at best, unreliable” in a prepared statement.

80 to 100 Million Could Lose Current Coverage

Friday, November 19th, 2010

November 12, 2010

An analyst from McKinsey & Company knocked the socks off insurance company executives yesterday when she told them the new health law will bring “fundamental disruption to the health care economy” — so much so that “something in the range of 80 to 100 million individuals are going to change coverage categories in the two years post-2014.”

They will lose their employer coverage, move into exchanges, or go on to Medicaid. This would be an extraordinary disruption that will cause widespread outrage.

Allisa A. Meade of McKinsey didn’t stop there in saying the markets are going to be upended. She told the meeting of America’s Health Insurance Plans in Chicago on Thursday that the health law also will create a subset of 30 to 40 million people who could be called an “outlaw market” of Americans who choose not to buy coverage and to pay a tax penalty instead.

According to Congressional Quarterly, “Meade said that population is likely to be healthier and wealthier than other Americans and that it might offer an economic opportunity to plans to sell low-cost products.

“It’s not clear, however, to what extent such plans would be permitted under the law. Another potential concern would be a possible stigma attached to selling plans to people who do not comply with the health law,” John Reichard of CQ reported.

This is unbelievable! Is ObamaCare going to create a nation of outlaws?

McKinsey also predicts many employers will drop coverage because it will make more economic sense to pay a penalty that is lower than the cost of providing coverage. Depending upon how many do, the individual market for health insurance could grow by up to 300 percent. Whatever actually happens, Meade said companies in essence must start from scratch in their individual insurance divisions because that market will change so dramatically

Editor’s Note: Article obtained from

Labor department cracks down on ERISA violations

Thursday, November 18th, 2010


WASHINGTON—The U.S. Labor Department’s Employee Benefits Security Administration launched enforcement actions against two dozen employers Tuesday, alleging they bilked their employees of more than $7 million in retirement plan and health care plan contributions.

In the cases, the Labor Department said workers’ contributions to their pension or health care plans that had been withheld from their paychecks were not deposited into the plans. Rather, the employers allegedly kept the money, used it for their own purposes or other purposes unrelated to the plans, the federal agency said in a statement.

 “Employees sacrificed wages to provide important benefits for themselves and their families,” Secretary of Labor Hilda L. Solis said in the statement. “These enforcement actions underscore the Labor Department’s commitment to ensure that these workers’ contributions are protected and available to pay future benefits.”

 Under the Employee Retirement Income Security Act, the Labor Department has the authority to conduct civil and criminal investigations to protect employee benefit programs and the assets set aside to pay benefits to workers and their families.

 For fact sheets on EBSA’s civil and criminal enforcement programs, see To view the employers facing enforcement actions visit

Wednesday, November 17th, 2010

 A weekly compilation from Aetna of health care-related developments in Washington, D.C. and state legislatures across the country  State budget problems are so dire and rising health care costs so worrisome that some states are considering what may have been unthinkable just a year or two ago — opting out of the federal Medicaid program.

The New York Times reported last week that Texas (see below) and a handful of other states are considering doing exactly that, especially given that federal health care reform will expand (as of 2014) the number of residents who are eligible for the state-administered health care program. 

In South Carolina, state officials there are considering not paying Medicaid claims as of March 2011 unless they can secure permission to run at a deficit. Some state leaders concede dropping Medicaid could have a devastating effect on their local economies, making such a course unlikely. The fact that it’s on the table, however, speaks volumes about the growing problem of runaway health care costs, and the need to develop systematic solutions in the way that the Patient Protection and Affordable Care Act (PPACA) addressed access issues.

TEXAS: Several Republican lawmakers are proposing an unprecedented solution to the state’s estimated $25 billion budget shortfall: dropping out of the federal Medicaid program. The Heritage Foundation, a conservative think tank, estimates Texas could save $60 billion between 2013 and 2019 by opting out of Medicaid and the Children’s Health Insurance Program, dropping coverage for acute care but continuing to fund long-term care services. With 3.6 million children, people with disabilities and impoverished Texans enrolled in Medicaid and CHIP, the Texas Health and Human Services Commission will release its own study on the effect of ending the state’s participation in the federal match program. Some lawmakers say not being able to reduce benefits or change eligibility to cut costs is “bankrupting our state.” State Rep. John Zerwas, an anesthesiologist who authored the bill commissioning the Medicaid study, said early indications are that dropping out of the program would have a tremendous ripple effect monetarily, and he worries about who would carry the burden of care without Medicaid’s “financial mechanism.” Currently, the Texas program costs $40 billion per biennium, with the federal government footing 60 percent of the bill. As a result of federal health care reform, millions of additional Texans will become eligible for Medicaid. Lawmakers want to examine whether Medicaid enrollees could be served more cost efficiently with better outcomes in a state-run program.

Week of November 15, 2010

3 Years and Counting – Whatever Happened to………………..7 More Indictments?

Wednesday, November 17th, 2010

Indicted contractors not new to Valley scandals

June 05, 2007 8:18 PM
Carlyn Ray Mitchell

McALLEN — The two contractors indicted in connection with an allegedly elaborate bribery scheme involving a handful of PSJA school district officials have been implicated over the past decade in a long string of questionable contract negotiations throughout the Rio Grande Valley.

Well-known Harlingen-based insurance agent Arnulfo “Arnie” Olivarez, 57, and George Hernandez, a 50-year-old private contractor who owns an area roofing company, were both accused in a May 22 federal indictment — made public Tuesday — of allegedly bribing school board members with vacations, concert tickets and prostitutes.

The U.S. District Attorney for the Southern District of Texas says the bribes were in exchange for lucrative contracts to provide the district’s employee health insurance coverage, as well as to build new schools and other district buildings.

The federal indictment also lists seven unnamed contractors who may or may not be indicted in the future in connection with the alleged briberies.

Olivarez operates Insurance Associates of the Valley, the business address of which is listed as 521 S. 77 Sunshine Strip in Harlingen. A call to that office on Tuesday seeking comment from an attorney was not returned.

In 2006, Olivarez, a Rancho Viejo resident, ran for and lost the Texas House District 38 seat in Brownsville, the same seat state Rep. Eddie Lucio III now holds.

Last month, Hernandez was re-elected to his second term on the Donna school board, on which he serves as board president.

While the indictment states that in that role, Hernandez took an oath to “preserve, protect and defend the Constitution and laws of the United States and of the State of Texas,” the actions for which he was arrested are not connected to his position on Donna’s school board.

A woman who answered Hernandez’s home phone number Tuesday said, “We don’t have any comments right now,” and hung up.

 The charges

The indictment states that between 1998 and 2001, Olivarez served as an insurance agent-of-record for the district, recommending to the board which health and life insurance bids to accept.

Then in August 2002, and again in 2003, the board awarded its health insurance contract to a provider and benefits administrator Olivarez represented.

The scope of those contracts and which insurance company received them wasn’t clear Tuesday. But insurance agents can earn thousands of dollars in commission from such contracts.

Olivarez is accused of giving PSJA school board member Raul Navarro $4,000 to pay for a band at a December 2003 reception for a Navarro family member.

The indictment against Olivarez alleges that in 2004 he provided Navarro with a Fourth-of-July weekend trip to South Padre Island.

As for Hernandez, he is accused of serving as a middleman between an unnamed contractor and district officials, distributing a total of $40,000 from the contractor to the district leaders.

Tuesday’s indictment also charges that Hernandez flew with PSJA school board member Rogelio “Roy” Rodriguez, Superintendent Arturo Guajardo and Navarro to Las Vegas in September 2003 for an Oscar De La Hoya boxing match.

It was unclear Tuesday how Hernandez may have benefited from the alleged exchanges.

Not the first time

 This isn’t the first time the names of Olivarez and Hernandez, referred to in the indictment as “Contractor Defendants,” have come up in connection with suspicious public contracts in the Valley.

 A 2003 lawsuit pending from the state charges Hernandez with violating the competitive bidding process in his previous role as building and grounds supervisor for Hidalgo County.

 District Attorney Rene Guerra on Tuesday would only say that Hernandez got the county into a “construction mess” when the new county jail was being built.

 In that case, the first architectural firm county commissioners selected in 1998 to build the new jail was Perspectiva, also known as Lopez & Lopez Architects. The firm was owned by the embattled Joe Lopez, a powerful Valley architect tied to many construction projects in the region and already indicted in connection with the larger contracts scandal that has rocked the PSJA school district for the past couple of years. Lopez was not named in Tuesday’s indictments, however.

 A look at Olivarez finds his hands in the La Joya school district health insurance contract process — which has been hotly disputed.

 Last fall, the district’s school board awarded its employee health insurance contract to AAG despite a claim by Blue Cross Blue Shield, which Olivarez represented, that the AAG bid was $2 million higher than Blue Cross Blue Shield’s bid.

Employers Given More Leeway to Switch Providers Under Obamacare

Wednesday, November 17th, 2010

November 16, 2010

Copyright Reuters

U.S. employers offering health insurance to workers will not lose protected status under the new healthcare law if they decide to switch healthcare plan providers, U.S. administration officials said Monday.

At issue is President Barack Obama’s pledge that people can keep their current healthcare plan if they liked it and administration officials have said the protected status aims to minimize disruption in coverage.

Under the overhaul passed earlier this year, employers must adhere to certain rules to keep special “grandfathered” status that exempts them from imposing other provisions in the law such as an appeals process and mandatory preventive care.

Any plan that made significant changes to their employees’ coverage, such as reducing workers’ benefits, increasing costs or changing health insurance carriers, would lose protection.

But officials at the U.S. Departments of Health and Human Services, Labor and the Treasury said, if an employer chooses another health insurance company to provide coverage, they can keep their protected status.

“The purpose of the grandfather regulation is to help people keep existing health plans that are working for them,” the agencies said in a statement.

“This amendment furthers that goal by allowing employers to offer the same level of coverage through a new issuer and remain grandfathered, as long as the change in issuer does not result in significant cost increases, a reduction in benefits, or other changes described in the original grandfather rule.”

The change comes after complaints that preventing companies from choosing another insurer would restrict “their ability to shop around for the best deal,” one official told reporters in a conference call speaking on background.

Health insurance providers include Aetna Inc., Cigna Corp. and UnitedHealth Group Inc., among others.

The amended rule only affects group health insurance plans, not those sold to individuals. Only a small number of employer plans are expected to be affected, officials said.

(Reporting by Susan Heavey; editing by Andre Grenon)

ING Lays Off 60 – Global Chief Resigns

Wednesday, November 17th, 2010

ING Group has laid off 60 people at its Windsor office as part of a global reorganization in which Thomas J. McInerney, the former Aetna executive who rose to head ING’s global insurance operations, is leaving the company.

The employees being laid off were notified last week but most will be with the company until the end of the year, said Dana Ripley, a spokesman for the U.S. ING insurance unit. The cut is part of a reduction of 600 positions in the United States, including 400 layoffs and the elimination of 200 unfilled positions.

Windsor, the largest location for ING in the United States and headquarters of the U.S. retirement services business, has 1,620 employees and about 200 outside contractors, Ripley said.

ING had 2,500 local employees when the company bought Aetna’s financial services business in 2000. McInerney at the time was head of that unit, and later rose within the ING ranks to his current post as chief operating officer of ING Insurance, based in Amsterdam. He is also a member of the corporate executive board.

[Sample Our Free Connecticut Business Midday Newsletter]


McInerney is being replaced by two European executives who will join the management board of the insurance business, ING said.

The changes are part of a breakup of ING, in which the corporation is spinning off its insurance operations with separate public stock offerings in the United States and Europe. ING Banking will continue to trade as the surviving corporation under the current stock, which is issued in Europe.

Catherine Smith will remain as chief executive of U.S. retirement services and the Windsor office will still be the headquarters of that operation, which is part of the insurance business.

Editor’s Note: ING is a major writer of medical stop loss insurance. Aviva may purchase the ING block.

Paying Cash For Dental Expenses May Be Less Expensive Than Insurance

Tuesday, November 16th, 2010
Dental, Vision & Hearing Plan

UCT - Where Community and Compassion Unite
50% Commission*

8% Lifetime Renewals

 9 Month Advance

*SC, TN, KY, CO, SD call for comp.
Issue Ages:  18-84
10% Household Discount

If two or more people, living in the same household at the same address, apply for coverage at the same time, then each may receive a 10% discount.

Call Western Marketing for more information: 


Ask for Doug, Justin, Robin or Russ 
Western Marketing
Western Marketing

 Dental Vision Hearing

The client may choose between a $0 or $100 Policy Year Deductible.  After the Policy Year Deductible is satisfied, UCT will pay the following percentages of actual charges up to the Policy Year Maximum Benefit:
  • 60% in the 1st Policy Year;
  • 70% in the 2nd Policy Year;
  • 80% in the 3rd Policy Year;
  • 90% thereafter.
  • Client chooses $750, $1,000, $1,500 or $2,000 Policy Year Maximum Benefit.

Guaranteed Renewable for Life
DentalUCT doesn’t charge a policy fee and, although some limitations do apply, your acceptance for this insurance is guaranteed.  This Policy is renewable as long as you live, provided you continue to pay premiums when due. 

Covered Expenses
  • Dental services, performed by a licensed dentist, including one annual examination and cleaning, x-rays, fillings, prophylaxis, bridges, crowns, dentures and outpatient dental surgery prescribed as Medically Necessary.
  • Hearing examinations performed by a physician or audiologist, including the cost of the hearing aid and any necessary repairs.
  • Visits to a physician for a basic eye examination or eye refraction, including the cost of eyeglasses or contact lenses prescribed by the physician, up to a maximum benefit of $150 in any one Policy Year.

Curacao 2012 Incentive Trip
Curacao 2012Don’t Forget: Your production counts towards Western Marketing’s Curacao 2012 Incentive Trip! 

CLICK HERE for details.


Editor’s Note: Posting this does not mean we are endorsing the product. We are simply showing that the cost of delivery through an insurance product is comprised of certain cost components.

Fred Hunt Opines

Tuesday, November 16th, 2010

TPA Forecast & Industry Trends for 2011 by SPBA President Fred Hunt

MyHealthGuide Source: Fred Hunt, President, Society of Professional Benefit Administrators (SPBA), 11/10/2010,

Preface by Mr. Hunt: For 30 years, I have been providing these very candid insights & prognosis. They are provided to all SPBA members as well as available for the outside world to read. To my own surprise, the accuracy rate of the forecasts has been extremely high. This time, I think the forecast will again be accurate, but the outcome more circuitous, with so many specific issues in flux right now. Flux will remain for about 4 years.

Health Reform is Entrenched, But …

In politics, 2011 will be a hectic gridlock prelude and staging ground for the 2012 elections. Both parties are facing internal civil war, so Democrat and Republican are no longer predictable cohesive categories, and neither side can achieve what they are promising to do with health reform.

Balance-of-power provisions in the legislative system prevent the new Republican House majority from achieving their stated goal of totally repealing health reform or even applying major “de-funding” to aspects already in the law. Only new requests for funding can be stopped by non-action by the House.

By Inauguration in 2013, too much will be entrenched to simply repeal. Consequently, wisely, most employers, TPAs, and plans are proceeding as if there will be no legislative changes and focusing on regulatory developments. They will be prepared no matter what. Any significant change to the employee benefits provisions will come via regulatory not legislative action.

Health Reform is Still Evolving

Health Reform is still evolving in terms of the rules of the game (regulations), and then what pieces will be changed or eased, and how will the various players (insurers, medical providers, employers, etc.) adjust to the new realities.

For example, will insurance companies withdraw from the health insurance market in the US because of the many limits and unsustainable rules and requirements imposed on them throughout health reform? The health insurance business will be unprofitable by 2014, and insurance companies need to make money.

Even if insurance companies try to branch out into new services in their own name, the term “insurance company” will probably trigger the punitive treatments. (Insurers that have had independent-named and independent-thinking/operating TPA subsidiaries should be fine.)

I had noticed in recent years that insurers had been searching for and found profitable new markets in parts of Europe and Asia to replace their US health insurance market. If insurers withdraw from the US health insurance market, there is a large vacuum in the market for TPAs and self-funding to fill. Meanwhile, doctors, hospitals, employers and individuals will all be adjusting their actions, from who they serve, how they practice, “gaming” the system, ACOs, etc.

Those new approaches will, in turn, cause other changes. For example, if insurers exit the market, what happens to state exchanges which the government sees as the key to the future health payment system? Exchanges rely on insurance companies. Similarly, doctors and hospitals may find it uneconomic to take Medicare and Medicaid patients at a time when both programs are expected to grow tremendously. So, health reform is like reshuffling the cards and dealing a new hand to each of the players.

Prediction:  Health Reform Boost TPA Business

For those and other reasons, TPAs and self-funding will find health reform a net boost to their business. Why? The punitive and suffocating aspects were applied to insurance companies, not self-funding and TPAs. In some cases, new requirements that do apply are simply factors similar to ERISA fiduciary and reporting self-funded plans have always had.

Employer Defection?

Health reform also deals employers a new hand.

Employers have sometimes resented the hassle of employee health plans because they have been considered a “fringe benefit”. However, as health reform unfolds, the market offerings from state exchanges and elsewhere become more cookie-cutter and bureaucratic.

Self-funding with TPAs becomes the only place to find personalized service and plan design flexibility. Those two factors have been the drivers of the many-thousands-percent growth of the TPA self-funding market over the past 30 years. The giant new importance for employers, is that employee health benefits become a tool of corporate profitability and survival. How? Why?

 The doctor shortage and regimented health plans means that promptly getting a valuable employee medical care and back to work is vital. A worker off the job waiting weeks for diagnosis and treatment (as happens in virtually all government-designed plans around the world) drains money and productivity from the employer. Unless the employer sponsors his own plan which is designed and administered for the maximum efficiency of that employer and workers, the employer is helpless.

Sponsoring a Heath Benefits Plan As Important As Any Company Decision

Sponsoring a heath benefits plan will soon become as important as having a service contract for valuable machinery the company needs. Most people have not yet seen this coming, but the reality will hit suddenly and quickly, and within just a couple of years. So, what will become vital to employers is the personalization, flexibility and cost-efficiency that has always been the greatest advantage of TPAs and self-funding.

Dont get me wrong. In pursuing a profitable post-health-reform future, TPAs will have many headaches, obstacles, and mazes to endure. TPAs will look and think differently from a pre-2010 TPA. The evolving new TPA will need to be alert and pro-active to opportunities for many new services which employers will want to hire TPAs to do. SPBA meetings in recent years have provided case studies and new profit centers which proactive TPAs are already preparing and discussing with clients. Those sessions and sharing will continue, so TPAs will have nationwide perspective and brain trust. Health reform and other factors are generating more services and requirements employers and plans will want handled, so TPAs will find the menu of services and profit centers they offer growing.

TPA Future Optimistic

In summary, the future outlook for TPAs and their main market of self-funding is optimistic. It will take dedicated brain power to envision as well as energy and patience to bring into reality, and to explain to clients the evolving new menu of available services for sale. Health reform will be a case of TPAs turning lemons into lemonade.

TPAs Must be Pro-Active

The best news of this report is that there has been a wonderful change in TPAs attitude this year! For several years, a main theme of my industry forecasts has been that TPAs need to maintain the pro-active attentive energy and focus on government rules, regulations, industry trends and interacting with other TPAs. I saw too many TPAs getting lazy and just coasting along. They were becoming a risk to themselves and to the whole TPA self-funding concept.

In 2010, when things seemed scariest, I have seen TPAs rise to the challenge. Whether from just plain anger or a determination to master the new challenge, I have seen a big jump in the pro-active professionalism of TPAs and SPBAs Stop-Loss Partners. That is the best news in years, and makes my prediction, about a bright future for TPAs and self-funding all the more certain. This is a reinvigorated industry! SPBA members have taken the leadership role of becoming resources of insight for clients and their communities on the big, small and unseen agenda aspects of health reform. TPAs and Stop-Loss Partners are instantly digesting every new batch of insider insights and analysis on how the laws will be applied. They have actively submitted real-world insights to the reg-writers, and been rewarded with many regulatory decisions that recognize and accommodate those real-world needs. More than in past years, SPBAs TPAs and Stop-Loss are acting like a team determined to build an active role in whatever evolves.

About SPBA

SPBA is the national association of Third Party Administration (TPA) firms who provide comprehensive ongoing administrative services to client employee benefit plans. SPBA also has a Stop-Loss Service Partner category for carriers, MGUs, and re-insurers of self-funded health plans.  Visit

ING Gears Up For Insurance Sale

Tuesday, November 16th, 2010

ING will probably spin-off its insurance arm in two separate stock market listings in Amsterdam and New York, says chief executive Jan Hommen.

ING would have a Europe-focused listing for its Asian insurance business, while a US initial public offering would have a strong position in retirement services. The Europe flotation would probably include its UK general insurance arm, ING Direct.

However, Hommen said the Dutch bankassurance giant was still in talks with many interested parties over the insurance units. Aviva has already cast the slide rule over the business to see if it is worth buying.

Hommen was speaking after the insurance business posted a €656m third quarter loss due to writedowns in the US. ING Group’s third-quarter net profits, fell to €371m from €499m last year, reports the Financial Times.

Editor’s Note: ING is a major stop loss writer in the United States. Who will buy this block?

Evil Health Insurance Company Exposed

Tuesday, November 16th, 2010

Do You Still Believe That Network Discounts Are Saving You Money?

Tuesday, November 16th, 2010

MyHealthGuide Source:  Jim Farley, J. P. Farley Corporation, 11/10/2010, www.jpfarley.comUSA Today (10/22/2010) featured a front page article (below) about a small physical therapy firm in Michigan who has successfully sued Blue Cross and Blue Shield of Michigan for tactics that would put the small firm out of business for offering Ford, GM and Chrysler an alternative that would have saved them millions of dollars per year on physical therapy claims. This is the same Blue Cross plan that has had suit filed against it by the U.S. Department of Justice for paying hospitals higher prices in exchange for bigger discounts. (It should be noted, others are being investigated by the feds and states for similar practices.)Basically, the Physical Therapy firm came up with a better and less expensive way to handle physical therapy for the automaker’s self insured plans which were administered by Blue Cross and Blue Shield of Michigan. Blue Cross then refused to administer the therapy claims submitted for reimbursement by the small firm. Blue Cross then appears to have encouraged hospitals to revoke ‘discounts’ on all other services the hospitals rendered to participants of the automaker’s plans. When that did not work, Blue Cross then kicked the small firm out of its provider network in an attempt to deny the small firm customers.What really needs to be asked in this situation is why did this occur?

The payments involved were payments to providers of physical therapy, not payments to Blue Cross. The automaker customers reported that the small firm cut their physical therapy costs by 40%.

Carriers who are constantly push their big discounts say they are trying to save plans money. However, when their customers make moves that actually do save them money, the carriers suddenly step in and threaten to stop the practices put in place to achieve plan savings. The network discounts will save a plan money as long as the measurement used to determine savings is limited to the discount. If you consider costs, what a plan actually spends in health claim costs, the savings quickly disappear.

Which is more important to you, the amount of the discount or the total cost of the plan? If it’s the latter, network discounts are not the answer.

US Sues Michigan Blue Cross Blue Shield
MyHealthGuide Source: Pete Yost  with contributions from Mike Householder, 10/18/2010, U.S. sues Michigan Blue Cross Blue Shield – is this happening with your insurance carrier? WASHINGTON (AP)  —  The Justice Department alleged Monday in a lawsuit that Michigan Blue Cross Blue Shield is discouraging competition by engaging in practices that raise hospital prices  —  conduct an assistant attorney general vowed to challenge anywhere it is found in the United States.The suit targets “most favored nation” clauses between Michigan Blue Cross Blue Shield and health care providers which, according to the government, essentially guarantee that no competing health care plan can obtain a better rate.Michigan Blue Cross Blue Shield has most-favored-nation clauses or similar language in contracts with at least 70 of 131 general acute care hospitals in the state, the government alleges.The lawsuit said that Michigan Blue Cross Blue Shield intended to raise hospital costs for competing health care plans and reduce competition for the sale of health insurance.

“As a result, consumers in Michigan are paying more for their health care services and health insurance,” Assistant Attorney General Christine Varney, who runs the Justice Departments antitrust division, told reporters.

In response, Michigan Blue Cross Blue Shield said the lawsuit is seeking to restrict the nonprofit companys ability to provide the most deeply discounted rates from Michigan hospitals. The company said that negotiated hospital discounts are a tool that Blue Cross uses to protect the affordability of health insurance for millions of Michigan residents.

“Our hospital discounts are a vital part of our statutory mission to provide Michigan residents with statewide access to health care at a reasonable cost,” the company said.

In some instances, the lawsuit states, Blue Cross has negotiated most-favored-nation clauses in exchange for increases in the prices it pays for the hospitals services. In those instances, says the suit, Blue Cross has bought protection from competition by causing hospitals to raise the minimum prices they can charge to Blue Cross competitors.

“Blue Cross has not sought or used MFNs to lower its own cost of obtaining hospital services,” says the lawsuit.

The state of Michigan joined the Justice Department in the case filed in federal court in Detroit.

The lawsuit outlines two types of most-favored-nation clauses requiring a hospital to provide services to Blue Cross competitors either at higher prices than Blue Cross pays or at prices no less than Blue Cross pays.

In alleging violations of the Sherman Act and the Michigan Antitrust Reform Act, the government said that under the “MFN-plus” clause, Blue Cross negotiated agreements requiring more than 20 hospitals  —  including Sparrow Hospital in Lansing, St. John Hospital in Detroit and Munson Medical Center in Traverse City  —  to charge some or all other commercial insurers more than the hospital charges Blue Cross. Under the other clause, Blue Cross has agreements requiring more than 40 small, community hospitals to charge other commercial health insurers at least as much as they charge Blue Cross, the lawsuit alleges.

Sparrow Health System spokeswoman Rose Tantraphol said Sparrow was not a party to the lawsuit, has not seen it and could not comment on the particulars of it.

She did say, though, that Sparrow “has a similar contractual arrangement with Blue Cross Blue Shield of Michigan as most other larger Michigan hospitals,” and “as is common practice throughout the nation, contracted rates are determined, in part, based on volume.”

In a statement, Munson said it was monitoring the situation “with interest,” but had “no basis to know if the allegations in this lawsuit are true.”

St. John Providence Health System spokeswoman Maureen Petrella said she had no comment.

Varney declined to say whether the Justice Department has open inquiries in other states of most-favored-nation clauses, which are not illegal unless they stifle competition.

About J.P. Farley Corporation

J.P. Farley Corporation founded in 1979 by Jim Farley, current President and CEO, is a privately-held third-party administration and consultation firm. The company was founded to deliver added value to employee benefit Plans that are self-funded for medical, prescription, dental, vision, short-term and long-term disability benefits. Flexible Spending Accounts (FSA), Health Reimbursement Accounts (HRA), and Health Savings Accounts (HSA) administration are also part of the portfolio of service offerings.  Visit


Shindler’s List

Tuesday, November 16th, 2010

oved Applications for Waiver of the Annual Limits Requirements of the PHS Act Section 2711 as of November 1, 2010

Dr. Alan Preston Offers Perspective to Previous Post on This Blog

Saturday, November 13th, 2010

In the article “Health Insurers, Drug-makers Oppose Repeal of Obama Healthcare Overhaul”, the title suggest that health insurers and drug makers love what is in the bill.  That is not an accurate representation for anyone who has come to that conclusion.  If you pay me a million dollars next week, and in doing so, you bankrupt my neighbors and friends, I may recognize the damage you are doing around me; however, I benefit so much financially, I would never want you to reverse your course.  Therein is the issue with this reform bill.  It will benefit a few and benefit them substantially at the unsustainable level of the many.  Those who benefit are not for the reform bill per se, they are for the financial windfall it may create for them.

I would love the government to create a program that requires all Americans to have an insurance policy that guarantees that when you buy my product, someone else will pay the bill and eliminate any likelihood that I will ever have bad debt.  That would be a tremendous benefit to me. I would also get very rich in the process even if it did hurt many people along the way. And as long as I am doing well, why do I care if others are harmed in the process?

Well, we need to care.  It is ok for individuals to benefit at a greater or lesser level than others but it shouldn’t be that I benefit at your expense or demise. Somehow, that just doesn’t resonate with me. 

How does a government benefit by having this reform in place?  Well for some, the ideology is that it will benefit those who cannot afford health insurance and then allow the same individuals to access their healthcare needs for free.  Medicaid programs provide such a safety net now and states are struggling how to continue to finance this program.

 Providers that care for these people complain that they do not get enough from the government and want more.  They seem to forget that if the tax payers did not support the Medicaid program, they would receive little to nothing from the person obtaining their service.  Since doctors are considered “rich” under the Obama administration, the desire is to tax them more so we can pay for programs like Medicaid which will provide free care to the poor and continues to provide a financial benefit to the doctors.

The other political ideology is that the government should run healthcare and anything the government can do to destroy the private insurance system will make people believe that they need to depend on the government for insurance solutions. This way, those in power can stay in power because they will try to convince people, through scare tactics, that if the party that brought you the benefit must stay in power or you will lose the benefit by switching parties.

 That ideological thinking suggest that all business is greedy and they exist to benefit the business to the exclusion of all others. They think the government is about the people helping the unfortunate by going after all the greedy businesses and greedy “rich” people in society and punishing them for their “greed” by taxing them more and wiping them out (i.e. insurance companies) though policy like Obamacare. This way, there is an appropriate balance in society and the rich can never get too rich and the poor never have to suffer too much.  Unfortunately, those who think that way really do not understand how a business works or how a society is motivated to create solutions. 

The article says  “The (healthcare) system is broken now …,” said Fowler, the policy deputy director at HHS’ newly formed consumer and insurance office. “We may tweak (the law), but overall it is a very positive direction forward.”  Statements like these are designed to pull on emotional strings of people.  Our system is far from broken.  We have a quality healthcare system.  Most heads of state around the world come to the US when there is a need for serious healthcare.  Would they come here if the system was broken?

 The system costs a lot and if that is the definition of a broken system, then Obamacare is going in the wrong direction.  It adds to the costs of health insurance.  Taxing the healthcare supply chain and mandating additional benefits will have to be paid for by the users and they will see premiums go up to pay for the additional benefits and pay for the increase in drugs and medical devices due to the added taxes of such. If cost is the reason it is broken, then Obamacare just added to the costs and broke it even more. In addition to the increased direct costs in the form of insurance premiums, there are other costs to consumers; increased taxes to pay for all of the subsidized care and that will not be cheap.

 Dr. Alan M. Preston

Alan M. Preston, MHA, Sc.D.

   Healthcare Policy, Biostatistics, Epidemiology

Editor’s Note: Dr. Preston can be reach via email at .

Health Insurers, Drugmakers Oppose Repeal of Obama Healthcare Overhaul

Saturday, November 13th, 2010

By Susan Heavey
November 12, 2010

Copyright Reuters

Repeal reform? No thanks, say health insurers, drugmakers and others looking for a clearer picture of the U.S. healthcare market after the bruising passage of the controversial overhaul law.

Company executives at the Reuters Health Summit this week said the law is far from perfect and said they will push for more steps to tackle stagnant health information technology and skyrocketing costs.

But after two years of debate over the issue, they need to move forward with clear steps on how to realign their businesses.

The new healthcare law created “a stable, predictable environment, however painful it has been in the short term,” GlaxoSmithKline Plc’s Chief Strategy Officer David Redfern said at the summit in New York.

“When you are running a business, the hardest thing is changing policy and a changing environment because it is very difficult to plan, predict and ultimately invest in that sort of scenario,” he said, echoing other speakers.

The industry’s assessment comes a week after U.S. elections saw gains among Republicans, who take over part of Congress in January after campaigning with a promise to repeal the healthcare overhaul passed by Democrats in March.

Few executives and industry experts anticipate any substantial changes to the overhaul despite the heated debate.

Uncertainly has plagued the sector since President Barack Obama won the 2008 election and pledged to revamp the nation’s $2.6 trillion healthcare system and help the uninsured.

The resulting law enacts major changes on insurers, from consumer protections and more company taxes to new spending rules. It also requires people to buy health policies or face fines starting in 2014, among other provisions.

Health officials must still hammer out how to implement the law and finalize hundreds of new rules and regulations. Many such details are key, as the sector looks to adjust its business for 2011 and beyond.

Republicans have vowed to repeal the law, though some have said they more realistically will have to target either specific parts of the measure or its funding.

“Anti-reform made good talking points before the election,” said the Department of Health and Human Services’ Liz Fowler, adding that people “will find more to like than to dislike” in the law once it is more in place.

“The (healthcare) system is broken now …,” said Fowler, the policy deputy director at HHS’ newly formed consumer and insurance office. “We may tweak (the law), but overall it is a very positive direction forward.”


Even insurers, which were vilified by Democrats in passing the reforms, said they don’t want a repeal, even as they push for clarity on forthcoming rules and seek additional changes.

Cigna Corp. CEO David Cordani and Aetna Inc. President Mark Bertoliniboth urged the nation to move forward on the overhaul.

So far, insurers are awaiting rules that limit how much they can allocate toward medical care versus administrative costs and profits. The rules take effect in January, weeks before any shift in Congress.

Republicans, who won control of the U.S. House of Representatives, will likely hold hearings and launch probes although Democrats in the Senate, and Obama can block attempted changes to the law.

Kris Jenner, portfolio manager at T. Rowe Price Healthcare Sciences Fund, said having Republicans in greater power should reduce pressure on industry.

“That level … negative rhetoric is likely to be scaled back. And from a stock level, that is a positive,” he said.

Since the start of 2009, the Morgan Stanley Health Care Payor index has risen 75 percent, outperforming a roughly 35 percent rise for the broader Standard & Poor’s 500 index.

“There should be less bark, if you will, out of Congress,” Jenner said.


Unlike insurers, drugmakers have escaped largely unscathed under the law, although there is still incentive to shape it.

“There are a couple things we don’t like about it,” said AstraZeneca Plc CEO David Brennan. “But in the end … no law is going to be perfect.”

Pharmaceutical companies cut a deal with Democrats to offer some discounts and pay billions in taxes to help fund the overhaul.

That means largely the status quo for sales, but a major chance to help mold other, seemingly more obscure parts of the law that may boost the industry as scrutiny over healthcare spending increases over time, said IMS Health’s Murray Aitken.

He urged drugmakers to try to influence the law as it is implemented over the next few years. “Don’t stand by and wait for this,” said Aitken, a senior vice president for the drug industry tracking company.

Drugmakers, such as Pfizer Inc. and Merck & Co. Inc., should target the Medicare advisory board aimed at cost-cutting and another comparative effectiveness group that will compare medications with each other as well as with other treatments.

All could eventually shape doctors’ use of pharmaceuticals, Aitken said, even though most increased use will be generic.

(Reporting by Susan Heavey; additional reporting by Lewis Krauskopf; editing by Gerald E. McCormick)

Texas to Opt Out of Medicaid?

Friday, November 12th, 2010

Facing a $25 billion deficit for their next two-year budget cycle, Texas lawmakers are considering closing the gap by dropping out of Medicaid. “This system is bankrupting our state,” State Representative Warren Chisum told The New York Times. “We need to get out of it. And with the budget shortfall we’re anticipating, we may have to act this year,” he said.

And Texas is not alone. American Legislative Exchange Council director of the health and human services Christie Herrera tells NYT: “States feel like their backs are against the wall, so this is the nuclear option for them. I’m hearing below-the-radar chatter from legislators around the country from states considering this option.”

Medicaid already eats up a huge share of state budgets. In Texas, for example, more than 20 percent of the state budget is spent on Medicaid. The crisis facing states across the country is that Obamacare forces states to massively expand their already burdensome Medicaid rolls. Starting in 2014 states must expand Medicaid to all non-elderly individuals with family incomes below 138 percent of the federal poverty level. At first, Obamacare picks up the first three years of benefit costs for expansion. But in 2017 states begin to shoulder a larger and larger share of these benefit costs, maxing out at 10 percent by 2020.

But that is just the benefit costs. Obamacare does not pay for any of the costs necessary to administer the expansion of the Medicaid rolls, rolls that are expected to increase by approximately 50 percent in states like Nevada, Oregon, and Texas. The Heritage Foundation’s Ed Haislmaier and Brian Blase found that just the administrative costs of the Obamacare Medicaid expansion will cost almost $12 billion by 2020. As Heritage visiting fellow Lanhee Chen details, some states are beginning to add the benefit and administrative costs together, and the picture isn’t pretty:

Texas recently concluded that the Medicaid expansion may add more than 2 million people to the program and cost the state up to $27 billion in a single decade. The Florida Agency for Health Care Administration estimated in April that Obamacare’s Medicaid expansion would require an additional $5.2 billion in spending between 2013 and 2019 and more than $1 billion a year beginning in 2017. In California, the Legislative Analyst’s Office concluded that Obamacare’s Medicaid expansion will likely add annual costs to the state budget in “the low billions of dollars.”

Mississippi, Indiana, and Nebraska each retained Milliman, Inc., a national health care econometrics firm, to perform a fiscal analysis of the Medicaid expansion on their states’ budgets. For Mississippi, Milliman estimates that between 206,000 and 415,000 people will be added to Medicaid, with a 10-year impact on the state budget of between $858 million and $1.66 billion. The seven-year cost of the Medicaid expansion in Indiana is estimated to be between $2.59 billion and $3.11 billion, with 388,000 to 522,000 people joining the state’s Medicaid rolls. Finally, Milliman estimates that Obamacare will result in nearly one of five Nebraskans being covered by Medicaid at a cost of $526 million to $766 million over the next decade.

Obamacare’s unfunded mandates are a fiscal time bomb set to explode state balance sheets across the country starting in 2014. States can prepare for the worst by slashing discretionary spending where possible and lowering existing health care costs by repealing their own burdensome health benefit mandates. But the only real solution is full repeal of Obamacare.

Source: Contributed by P Claw from North Carolina – The Heritage Foundation 11/12/2010 issue.


Bill, Texas to opt out of Medicaid; I have said this on day 1.   States should absolutely get out of the Medicaid business.   It is often the 2nd largest item in a state’s budget, right behind education. The reason President Obama says, with so much confidence, that the health reform bill will “not add one dime to the deficit” is because he created unfunded  mandates of  the cost of the program to  State Medicaid programs,  Employers and finally employees.  He taxed the healthcare supply chain, ( Rx, Device companies, and insurance companies all pay more)  increased the benefits to everyone ( no pre-existing conditions or lifetime maximums) which has driven up the cost of healthcare and then created a three tier unfunded mandate system to pay for the entire costs including the new taxes and penalties.

 If I were Governor, I would do the same thing, drop Medicaid.   So if you are in Texas and you want a free lunch (i.e. health insurance), then move to Louisiana, New Mexico, Oklahoma, or Arkansas ( or better yet Massachusetts since they have a state version of Obama care) .  The rest of us who remain here in Texas are working and we will have a huge tax break because we will no longer have to support those who do not contribute to the tax base, but do not hesitate to take away  any and all benefits our tax dollars will support. We will then have a wave of business growth and people all over America would flock to Texas because of the lower tax rates to the extent we pass the savings on to the citizens. Our unemployment would drop to 3% or less if we did this.

 It is about time.  Now let’s see if they have the spine to pull it off.  My gut tells me they don’t have the courage to say no to those who take from the system but do not contribute.  They are the same people who say “soak it to the rich” and the rich are the hands that feed them.

Dr. Alan M. Preston

   Alan M. Preston, MHA, Sc.D.

   Healthcare Policy, Biostatistics, Epidemiology


Blue Cross – Restraint of Trade? – Consumers Pay More? Who Works For Who?

Wednesday, November 10th, 2010

Case Against Blue Cross Shows Difficulty of Lowering Health Care Costs

By Alison Young, USA TODAY

PONTIAC, Mich. — As health care costs soared nationally, a small Michigan firm gave Ford Motor Co. a proposal to cut its physical therapy costs. The automaker signed up for an in-state pilot program, which was so successful Ford expanded it last year to cover about 390,000 employees, retirees and their families nationwide.Yet the cost-saving program created by Pontiac-based TheraMatrix has come under attack from Blue Cross Blue Shield of Michigan.

Court records allege Blue Cross used its position as the state’s dominant insurer to try to crush TheraMatrix as it worked to also sign up Chrysler and General Motors. A USA TODAY review of hundreds of pages of e-mails and internal documents that are part of a lawsuit TheraMatrix filed against Blue Cross indicates that TheraMatrix’s efforts to carve out a niche market in managing outpatient physical therapy costs was seen as a threat by officials at Blue Cross and by some Michigan hospitals.

MORE: Feds accuse Mich. Blue Cross of anticompetitive contracts\

“They tried to destroy us,” says Robert Whitton, a physical therapist who founded TheraMatrix in 1981. TheraMatrix has cut Ford’s physical therapy costs by about half, Whitton says, saving millions of dollars annually. Under Blue Cross, Ford’s costs averaged $745,000 a month just in Michigan, he says. “We shouldn’t have been in this position for creating a program that helped save health care costs.”

Blue Cross denies trying to hurt TheraMatrix’s business.

“The picture that they’re trying to paint is the big whatever giant with a chainsaw in his hand coming down on the little guy,” Jeffrey Rumley, Blue Cross’ general counsel, told USA TODAY. “I just don’t buy into that too easily.”

The dispute provides a window into some of the factors that make overhauling the nation’s health care system so difficult. The aggressive tactics employed against TheraMatrix raise questions about whether relationships between hospitals and insurers are inflating medical prices and stifling competition needed to control costs.

Court records depict Blue Cross — a non-profit created under Michigan law to provide affordable health care — as working with a major hospital to stop expansion of TheraMatrix’s program. They also reveal that Blue Cross barred TheraMatrix from the insurer’s medical provider network, which covers most Michigan patients.

A Detroit-area jury awarded TheraMatrix $4.5 million in July, finding that Blue Cross breached an agreement with TheraMatrix to process claims for its Ford program, then wrongfully interfered with TheraMatrix’s efforts to launch a Chrysler program. Blue Cross has appealed.

Last month, the U.S. Justice Department sued Michigan’s Blue Cross, accusing the insurer of a different kind of anticompetitive behavior: paying hospitals higher prices for medical care in exchange for a promise they would charge competing insurers as much as 40% more than they charge Blue Cross. Blue Cross says the suit is without merit.

Amid growing consumer fury over double-digit insurance rate hikes, the power wielded by huge insurance companies is under increasing scrutiny:

 • The Massachusetts Attorney General’s Office has been investigating whether relationships between insurers and hospital networks in that state have driven up health costs for consumers.

 • Pennsylvania’s insurance department is investigating whether Blue Cross plans in that state are engaged in anticompetitive practices. Blue Cross is a national brand, but its companies are independently operated.

 • In 24 states, two or fewer health insurers control 70% or more of the market, a study this year by the American Medical Association found.

 Effective antitrust regulation is critical to lowering health care costs, Christine Varney, the assistant attorney general who heads the Justice Department’s antitrust division, told lawyers at a health care conference in May. “The goals of health care reform cannot be achieved,” she said, “if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers.”

A battle over business

TheraMatrix’s battles with Blue Cross go back to 2005. That’s when Ford Motor Co. decided to try to save money by carving out physical therapy benefits from an employee health plan administered by Blue Cross. That February, Ford hired TheraMatrix to manage that aspect for its Michigan employees.

At the time, physical therapy spending for all Michigan Blue Cross customers was increasing by almost 17% a year, an internal Blue Cross report shows.

Like many major employers, Ford has a “self-funded” health plan. That means Ford pays Blue Cross an administrative fee to handle paper work and maintain a provider network, but Ford — not the insurer — is responsible for the medical bills. In 2003-04, Ford paid Blue Cross a $54 million administrative fee, plus other costs, a Blue Cross memo says.

TheraMatrix saved Ford money by creating a network of physical therapists willing to accept $68 per visit — significantly less than what Ford had been paying under Blue Cross. TheraMatrix also reviews treatment plans so patients don’t get too many or too few visits.

But the project was nearly derailed when Blue Cross said it couldn’t process claims for TheraMatrix, records show. About the same time, TheraMatrix alleges, Blue Cross decided to create its own discount physical therapy network.

Ford kept TheraMatrix; the program began in August 2005.

Michigan hospitals, which provide outpatient physical therapy, weren’t happy about the lost business, records indicate. They could have joined the TheraMatrix provider network, but most wouldn’t agree to the lower rate, says Whitton, TheraMatrix’s CEO.

The state hospital association gave its members an option if they wanted to take action. In an Aug. 1, 2005, letter about TheraMatrix, the group highlighted a provision in Blue Cross’ hospital contracts: If an employer such as Ford carves away categories of care, hospitals can revoke Blue Cross discounts for any other services used by patients on the employer’s plan. Association spokesman Kevin Downey says the group never suggested its members “should” revoke discounts.

None ended Ford’s discounts.

By early 2006, Chrysler, which also used Blue Cross to administer its health plan, was looking to hire TheraMatrix. This set off a series of urgent e-mails among top Blue Cross executives, court records show.

David Kee, head of Blue Cross’ Chrysler account, warned: “We need to do something fast and dramatic.” His strategy included showing that Chrysler could lose its hospital discounts if it went with TheraMatrix. “I think a carefully worded document, perhaps from the hospitals themselves could be valuable,” he wrote.

About a week later, e-mails show, such a letter was being offered by Beaumont Hospitals Vice President Mark Johnson — who had been a Blue Cross vice president before joining the suburban Detroit hospital system in 2004.

Blue Cross Vice President Kim Sorget said in reply that Kee could “use the letter as leverage with his customer to not proceed with the carve out.”

In August, after the TheraMatrix trial, Blue Cross re-hired Johnson as a vice president. Blue Cross said Johnson, Kee and Sorget were unavailable for comment.

Beaumont spokesman Mike Killian says the hospital system had a financial duty as a non-profit to stop honoring the discounts if necessary. When Ford went with TheraMatrix, it cost Beaumont $400,000 a year, Johnson testified at trial. Beaumont facilities would have lost $2 million a year if Chrysler and GM had followed suit, he said.

In spring 2006, Chrysler and the auto union UAW agreed TheraMatrix would start managing physical therapy for the automaker around July 1.

Two weeks later, Blue Cross kicked TheraMatrix out of the insurer’s provider network, which meant a huge loss of patients and doctor referrals.

“It was devastating,” says TheraMatrix President Bob Read. Blue Cross controls more than 60% of Michigan’s insurance market, covering nine times as many people as its closest competitor.

Blue Cross took the action because TheraMatrix’s relationship with the insurer is “competitive and damaging not only to BCBSM’s financial interests, but also to its business relationships,” Sorget wrote TheraMatrix.

The move outraged Ford officials.

“This is clearly a retaliatory action against Theramatrix,” Ford’s employee benefits director Lee Mezza wrote to Sorget. Mezza said TheraMatrix had cut Ford’s costs by 40%, and he accused Blue Cross of caring more about hospital revenue than saving customers money, according to a redacted letter in court records and a full version Mezza e-mailed TheraMatrix.

Ford spokeswoman Kimberly Harry said the company has no comment. Mezza, who has retired, is on Blue Cross’ board of directors and didn’t respond to an interview request.

Blue Cross refused for more than a year to let TheraMatrix back into its provider network, and the Chrysler program became critical to TheraMatrix’s survival, Whitton says.

Within the UAW, Blue Cross board member Chuck Gayney — a top UAW benefits official — continued to raise the specter of hospitals revoking discounts for Chrysler’s union employees, union memos show. UAW spokesman Michele Martin had no comment.

Beaumont Hospitals gave Blue Cross the letter about potentially canceling discounts for Chrysler and Ford on June 26, 2006.

The next month, Chrysler decided not to go forward with the program. Chrysler spokesman Michael Palese said the company had no comment.

Blue Cross, in court records, contends TheraMatrix hasn’t proven the insurer’s actions influenced Chrysler’s decision.

Blue Cross let TheraMatrix back into its provider network in August 2007, but a year later was again threatening to kick it out. The offense: TheraMatrix was discussing a potential program with General Motors, a letter sent to TheraMatrix shows.

Whitton says that’s when TheraMatrix sued Blue Cross.

‘You get the care that you need’

Neither Chrysler nor General Motors went ahead with a TheraMatrix program. In 2009, Ford expanded its Michigan contract with TheraMatrix to employees and retirees nationwide. The program has a 98% satisfaction rate, TheraMatrix says.

Ford retiree Mike Harris, 57, praises TheraMatrix. “You get the care that you need,” says Harris, who undergoes treatments for neck and back problems at a Detroit-area TheraMatrix clinic.

Butch Stokes, a UAW-Ford benefits representative at Local 737 in Nashville, says he initially was skeptical of the TheraMatrix carve out. “It’s worked great,” he says, because members have a good choice of providers and fewer hassles than with Blue Cross.

David Balto, policy director of the Federal Trade Commission’s competition bureau from 1995-2001, says Blue Cross’ conduct “clearly crosses the line.” The case shows the dangers of the lack of insurance competition nationally: “Ultimately it’s the consumer who is harmed,” he says.

Blue Cross general counsel, Jeffrey Rumley, says he’s not aware of anything in the TheraMatrix case “that would have a nexis to antitrust activity.”

The Michigan Attorney General’s Office asked TheraMatrix in September to produce documents about Blue Cross’ “competitive conduct.”

The U.S. Justice Department also is reviewing records, a June e-mail to TheraMatrix shows.

Both agencies said they can neither confirm nor deny any possible investigation.

TheraMatrix’s Whitton says his company is struggling to rebuild: “We are still in jeopardy.”

Editor’s Note: This is not surprising when you let a third party negotiate provider contracts upon your behalf. More employers are beginning to realize that they can do better by direct contracting with willing medical providers.

Dr. Alan Preston Offers Cogent Perspective on Favored Nations Contracts

Wednesday, November 10th, 2010

Bill, I read Lisa’s article  (See Post below) and she did a good job on the major points.   I enjoy the blog.

By the way, The Michigan BCBS which was sued for “anticompetitive” behavior is one of the most outrageous suits I have seen.  This is how commerce works all over the world. If you  want to buy something in volume, you will ask the seller for a volume discount.  BCBS asked the hospitals for a volume discount.  That is as American as apple pie and motherhood.  There is a seller and a purchaser to all transactions.  The government decided not to sue the seller of the services at a discount, they decided to sue the purchaser for asking for a discount in exchange for buying a volume of services.  WOW…that is simply un-American.  Consumers could be sued for buying at a discount when they purchase a volume of goods or services…What country is this?   I was under the impression I lived in the United States of America where capitalism thrives and is supported by our government.  I must have been in a coma, because when I awoke and read this in the WSJ, I thought I was transported to some other country that hates the idea of capitalism.  Why did the seller agree to discount there services if they felt it was “anticompetitive”?  Maybe the government should sue the hospital as well.  While they are at it, maybe they can sue the patient for getting sick in the first place!

My thoughts as always.  Thank you,

 Dr. Alan M. Preston

Alan M. Preston, MHA, Sc.D.

Healthcare Policy, Biostatistics, Epidemiology

 Editor’s Note: Dr. Preston has been CEO of four different Managed Care Payors, CEO of a large Multi-Specialty Physician Group with primary care clinics, an outpatient surgery center, physical therapy, occupational medicine, radiology, and urgent care. Dr. Preston periodically teaches and is adjunct professor at the University of the Incarnate Word, San Antonio.

Outside the Box – The Effects of ObamaCare

Wednesday, November 10th, 2010

Tue, Nov 9 2010, 04:43 GMT
by John Mauldin

What will be the effects of ObamaCare? My friend Lisa Cummings, an expert on employee benefits (she was one of the first employees at Dell and was a senior exec at Wal-Mart), has analyzed the bill; and from what she tells me it appears to be one big pile of unintended consequences and costs. It will be far cheaper for an employer to simply pay the $2,000 fine and pay for the employee to enroll in the government health exchange program, which of course puts more cost on the taxpayer. Behind the curtain of wonderful and laudable objectives is a mountain of regulations and costs. But that is what is coming. I asked Lisa to give me a written report on just the more important changes and costs, and that is your Outside the Box reading today.

Lisa Cummings is an expert global benefits consultant with an emphasis on advising Fortune 500 companies of best practices regarding plan design and legal compliance. She is an ERISA attorney by training and has a rich experience with health and retirement plans in the US and around the world.

The Effects of ObamaCare

By Lisa Cummings

It Does What?

Have you ever seen a television commercial touting diet pills, weight loss in a bottle, and bought them, thinking, “The ad seems reasonable, with a nice actor I’ve seen,” and then get the bottle home and read the side effects? Although you were promised a return to the slim, beautiful you, the side effects on the bottle warn of “potential for heart attack, broken bones, upper respiratory infection, edema, loss of balance, and death.” Talk about the cure being worse than the condition!

Health-care reform as signed into law is a prime example of the cure prescribed by Dr. Obama being worse than our current condition of rising health-care costs and uninsured Americans.

We all know that health care in America is on course to change significantly with the passage of the Patient Protection and Affordable Care Act (“the Act”) on March 23, 2010. Most of you may think of this as “health-care reform,” though some refer to it as “ObamaCare.”

You may have heard about what ObamaCare was intended to do, but have you heard about the unintended outcomes of this massive restructuring of US health care? As of the date of this writing, over 55% of Americans would like to have ObamaCare repealed,[1] and that’s based on what they know about it. Let’s also consider the challenges that aren’t commonly known.

Intended Outcomes of Health Care Reform: Just What Dr. Obama Ordered

Coverage for all with capped premiums

First, we’ll begin with a recap of what the President and Congress intended to enact: ObamaCare’s premise is that all Americans should have health insurance and shouldn’t have to pay more than a set amount for their coverage. ObamaCare requires that an employee whose “household income” is less than “four times the Federal Poverty Level” (currently $73,240 for a family a four) pays no more 9.5% of his household income for employer-sponsored health insurance coverage. This is like car insurance being required by a state and then limiting the amount the driver has to pay for monthly premiums, basing the cost on an ability to pay.

General provisions of ObamaCare, generally starting in 2014

You can’t be turned down for health insurance coverage.

You can cover your children on your health plan up to age 26 (starts in 2011).

If you can’t afford health insurance, you will receive assistance from the government to purchase it.

You can purchase health insurance more easily.

Your personal health records will be digitized, resulting in cost savings.

On the surface, these items sound wholesome, kind of like motherhood and apple pie. However, some of the additional items required by ObamaCare include hundreds of requirements for individuals, for businesses, for insurance companies, for health care providers such as doctors and hospitals, and for government entities.

To get a visual idea of the complexity surrounding the new health-care requirements, you can peruse the following chart prepared by the Joint Economic Congressional Committee, which outlines the bureaucratic Frankenstein that is being created. I’m printing the chart in a size that is too small to read here, just to give you the idea.

Outside The Box

Side Effects of Obamacare: Beware, the cure may be worse than the current condition.

The Health Reform Act and accompanying Reconciliation Act encompass over 1000 pages. Since their passage in March, dozens of additional interim final regulations, guidelines, and memos have been written, and in addition direct conversations from the HHS Secretary have now been made into law.

Here are some of the more audacious requirements of ObamaCare, along with the year they become effective:

  • Moves 18 million people onto Medicaid programs. Remainder of uninsured will go to state health exchanges (2014).[2]

To put ObamaCare in context, keep in mind nearly 60% of Americans receive their health care from their employer. 19% of Americans have no health coverage.

Health Coverage Source

Once ObamaCare is in force in 2014, the uninsured will be redistributed: a third will go to Medicaid, 28% will go to Government health exchanges, and the remaining 41% will continue to be uninsured.

Outside The Box

  • Adds new taxation on capital gains, including a new 3.8% tax on the sale of your home (2013)
  • Mandates auto-enrollment in long-term care at a cost of $123 per month for everyone (the CLASS Act), requiring an affirmative opt-out if you don’t wish to be covered (as soon as HHS can determine how to implement).[5] This section is so outrageous, Sen. Kent Conrad (D-ND), Senate Budget Committee chairman, called it “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.”[6] (Yes, Sen. Conrad voted for ObamaCare and the self-described Ponzi scheme.)
  • Adds a medical device tax of 2.9% on everything from CT scanners to surgical scissors, to be passed along to health-care consumers (2013)[7]
  • Enhances the Nanny State: restaurant chains will have to post caloric content next to prices on the menu, and nutritional information must be posted on the outside of all vending machines (2011).[8]
  • Triggers loss of insurance coverage by large numbers of lower-paid employees, starting in 2011

A large number of “mini-med” plans, typically limited-coverage plans for employer groups in the retail and fast-food industries, and providing child-only coverage, will not be able to meet federal regulations on the minimum annual dollar limit. The minimum annual limit for benefits covered by the health plan is $750,000 in 2011. HHS has so far granted waivers for more than 30 employers, including such diverse employers as McDonalds, Jack in the Box, the United Federation of Teachers Welfare Fund, and a New York teacher’s union, to allow coverage to continue for 2011.[9] What about the other 1,000,000 individuals who were previously covered under these plans? Does that mean they will no longer have coverage starting January 1, 2011?

  • Subjects college student medical plans to possible elimination since they will not meet the “Medical Loss Ratio” requirements recently approved by the National Association of Insurance Commissioners.[10]

The Pork Included in ObamaCare

The Cornhusker kickback: the federal government picks up Nebraska’s Medicaid expansion bill forever.[11]

The Louisiana Purchase: Louisiana receives $300 million for increasing Medicare subsidies.[12]

$100 million special funding for a hospital in Connecticut[13]

Funding of asbestos clean-up in Montana[14]

The Gator Aid, by which three counties in south Florida are exempted from Medicare Advantage cuts[15]

Unintended Consequences of Health Care Reform

“We have to pass the bill so that you can find out what is in it.” – House Speaker Nancy Pelosi, March 9, 2010

Well, now we know. Here are some of the outcomes of legislation that was passed without having been read:

Employers may decide it is cheaper to drop health care plans altogether and instead pay the $2,000 penalty per employee. Large employers typically pay in excess of $9800 per employee for health plan coverage today.[16] After the new requirements for health-care reform are added to the already large costs, they may decide to split the cost savings with the employee and reinvest the difference in their businesses, whether in the US or in other countries where perhaps a higher return on investment can be achieved. Employers may decide to limit the number of full-time employees, favoring part-time employees instead. Employer penalties only apply to full-time employees working more than 30 hours a week. Would you try to move employees to less than 30 hours a week to save taxes?

Remember, employers today provide 59% of all Americans with their health insurance. The Congressional Budget Office estimates that today over 150 million Americans have their health insurance with their private employer. If employers decide to get out of the health insurance game, then the majority of Americans will have to look to the government health exchanges to purchase their health insurance.

When 2014 arrives, every employer with a health-care plan will need to make the same calculation: Determine the per-employee cost implications of providing a health-care plan and compare them to the benefit of dropping the plan, paying the penalty, and reimbursing the employee for his employee-mandate fee. The employer might also decide to share the cost savings with the employee to help reimburse the employee for his premium cost to purchase government-exchange health insurance.

Outside The Box

Aside from the hard-dollar cost savings, the employer will also need to analyze whether providing a health-care plan can help the employer attract and retain highly prized employees. The logical conclusion is that employers who hire positions in great demand will be more likely to keep employer health-care plans, while employers who hire less unique skills will more likely terminate their health-care plans, pay the penalties, and redeploy the savings where there is a higher return on investment.

Healthy people will pay more for insurance coverage. Instead of individuals being able to choose the coverage they need, they will be required to purchase only government-approved benefit choices. Younger individuals will be required to subsidize older individuals, who will be required to have preventive-care screenings, with an expected increase of 17% in premiums, or up to $500.[17]

Health-care cost curve bends in the wrong direction by increasing overall health spending by $222 billion between now and 2019.

Outside The Box

Neglects Medicare funding, which is already due to become insolvent in 2016

Retirees in Medicare Advantage plans may lose their coverage due to decreased government funding. Starting in 2011, the government reimbursement will be frozen at 2010 levels.

Health providers will be reimbursed less for Medicare patients, causing providers to reduce the number of Medicare patients they treat. This is an outcome of the reconciliation act that followed the passage of ObamaCare, migrating funding away from Medicare providers to pay for part of the ObamaCare provisions.

Consolidation of health markets: from small community hospitals, to doctors, regional hospitals, and insurance companies[19]. The consolidation of health-care providers will lead to increased costs for hospitals and doctors, simply because there is a reduced supply of providers.

If uninsured individuals choose to pay the tax instead of signing up for insurance through a government exchange, the government-exchange premiums will become so expensive, individuals won’t be able to afford to buy insurance. Just look at the outcome of the Massachusetts mandated health-care coverage for an idea of how this will turn out.

Child-only policies will stop being issued due to the required annual benefit levels being increased along with the new requirements that at least 85% of all insurance premiums be used on health-care providers. This means that higher-cost child-only coverage plans will fail to meet the limits and must be discontinued. This will cause the children to lose their own cheap coverage and instead either have to move to their parents’ employer plans or access care through the government exchanges.

Employer-sponsored retiree medical plans may be dropped due to repeal of the Medicare part D pharmacy subsidy. Although the subsidy isn’t cancelled until 2013, the SEC requires accounting recognition of any changes as soon as they are known. This provision is what triggered the earnings impact announcements by Caterpillar, Deere, and AT&T within a week of ObamaCare being signed into law. Over 43% of employers with retiree plans indicated they would likely eliminate retiree medical programs due to the additional requirements under ObamaCare.[20]

Employers’ Decision to Keep or End Retiree Medical Plans

Employers’ Decision

It isn’t going to be easy or cheap to be ObamaCare-compliant.

All of us will be affected in numerous ways by ObamaCare. Below is a listing of major groups that will be impacted. Overall Economy[21]

Some 670,000 jobs could be eliminated due to the additional $760 billion in taxes, penalties, and fees on investors and businesses.

The federal deficit will be increased up to an additional $115 billion over original projections.[22]

By 2020, ObamaCare will:

Increase the interest on the national debt by $23.1 billion per year

Raise the national debt by more than $753 billion

Increase annual budget deficits by an average of $75 billion.[23]


Short-term: Costs are increasing for employer-sponsored plans. Health-care premiums for 2011 are being increased by an average of 8.8%, and a 1-2% increase is due to the mandated 2011 changes of covering all dependents to age 26 and eliminating certain lifetime and annual limits.[24]

Starting in 2014: Employers who provide health-care plans for their employees will be required to ensure that the level of health-care benefits they provide their employees meet new government standards or face fines and penalties equal to $2,000 per year for each full-time employee. Even then, if their employees would have to pay more than 9.5% of their adjusted gross income for the health plan, or if the employee chooses to purchase from a government exchange, the employer will still have to pay a $2,000 penalty.[25]

Employers who provide health coverage will be required to provide an annual report to HHS that lists each individual eligible to enroll in “minimum essential coverage,” the length of waiting period, number of months that coverage was available, monthly premium for lowest-cost option, plan’s share of covered health-care expenses, number of full-time employees, number of months covered, and any other requirements that may be identified by HHS.[26]

If an employer doesn’t provide a health-care plan for employees and has more than 50 full-time employees (who work more than 30 hours per week), the employer must pay a penalty equal to $2,000 per full-time employee per year. [27]


Starting in 2014 you are required to have coverage, either from your employer or from a government-sponsored health-care exchange. If you don’t purchase it, the IRS will assess you with tax of $695 per year per family member (capped at three) or 2.5% of your income, whichever is greater.[28]


With the increase of covered patients, there will be a shortage of 150,000 doctors.[30] Doctors are already overworked. Patients will have to wait longer to can get an appointment to see the doctor.

Starting in 2011, Medicare reimbursements will be reduced. Medicare already reimburses doctors at an amount equal to only 81% of private payments.

Between 18 to 20 million new Medicaid patients will flow to doctors. Medicaid coverage pays doctors 56% of the private payment amounts. Federal funding will pay for parity to Medicare for 2013 and 2014, and then it is up to the states to figure out how to pay the Medicaid doctors.

Doctors will face more federal agencies, boards, and commissions, including the Independent Payment Advisory Board in 2012, a nonprofit Outcomes Research Institute, and the Physician Quality Reporting Initiative.

59% of doctors think the quality of medicine will decline in the next five years and 79% are less optimistic about the future of medicine. 69% are thinking about dropping out of government health programs, 53% would consider opting out of treating insurance-covered patients, and 45% have considered leaving the profession altogether. [31]


ObamaCare mandates the increase of Medicaid participation by 18-20 million more people, but provides states with limited support funding.

States are required to establish exchanges by 2013, and if they decline to establish exchanges, the Secretary of HHS runs the exchanges. Here’s a question for you: if HHS runs a state’s exchange, for whom do the state insurance commissioners work, the people who elected them or the federal government?

The states will first have to figure out how much money is required to pay for this – and guess what, it won’t be cheap. Texas’ Medicaid costs would increase by $4.5 Billion for 2014-2019 alone.[33]

These new state mandates explain why over 21 states have filed suit in federal court to declare parts of ObamaCare unconstitutional, as infringing on the Tenth Amendment rights afforded to states.[34]

A Medicaid Monster


Medicare Advantage plans, which cover nearly 25% of Medicare seniors, will be cut in half over the next ten years due to ObamaCare freezing payment to the plans.

Some $416.5 billion in “savings” from Medicare (actually, cuts in Medicare payments to doctors and hospitals) is being shifted from shoring up Medicare funding to paying for ObamaCare.[37]

The donut hole in Medicare Part D is being reduced with a $250 payment in 2010 and drug companies being required to provide a 50% discount on brand-name prescriptions filled in the hole.

The Medicare program will be adding 77 million baby boomers starting in 2011. Finding a doctor will become even more difficult with the already existing doctor shortage and another 18-20 million individuals receiving Medicaid coverage in 2014.

Medicare Part A providers – hospitals • will receive reduced funding. By 2020 15% are slated to become unprofitable, according to the Center for Medicare and Medicaid Services Actuary.

Seniors will pay higher taxes as well.


Three major tax increases:

  • New 40% excise tax on health insurance plans, known as the “Cadillac Tax” if a health plan is valued in excess of $10,200 for employee-only coverage [Can someone show me where the hell I can get a policy for less than $10,200?? Seriously. – JM] and $27,500 for family coverage. 43% of all plans are expected to incur this tax by 2018, when it becomes effective.[39]
  • Increase in hospital insurance portion of payroll tax: Medicare tax will be increased from 1.45% to 2.35% for families making more than $250,000. The new rate will be 3.8%, effective in 2013. Note: the health insurance rate increase is not being used to fund Social Security and Medicare, but rather a separate entitlement.[40]
  • Payroll taxes on investment. A new 3.8% health insurance tax applies to investment income, including capital gains, dividends, rents, royalties, and yes, even the sale of your home.[41]

Numerous additional taxes:[42]

  • Limit on itemized deductions for health care
  • Increased taxes on prescription drugs
  • Increased medical device taxes
  • Additional taxes on insurers

The Rollout Of Taxes For Obamacare

What’s Next?

Regulatory interpretations are piling up, along with regulatory burdens. Since ObamaCare and the Reconciliation Act were signed into law in March, there have been no fewer than twelve sets of additional regulations, guidelines, or notices that have been issued to lend clarification and at the same time add additional regulatory requirements. ObamaCare establishes more than 159 boards, panels, and programs, all of which will add to bureaucratic red tape.

Employers face immediate plan changes that must be implemented for the upcoming plan year. All plans (except retiree-only plans) have to allow children of covered employees to be added up to age 26. Additionally, the lifetime maximum benefit levels have to be eliminated. These costs alone will add 1-2% to 2011 health-care costs for employers.[44]

Longer-term, employers will need to consider whether they will cancel health-care plans in 2014, when exchanges become effective. Also, employers will need to determine whether they will eliminate retiree medical coverage due to elimination of the pharmacy subsidy in 2013.

Published on  Tue, Nov 9 2010, 08:20 GMT

Cross Border Dental Scam

Tuesday, November 9th, 2010

Recently we were employed by a large employer, located along the Texas-Mexico border, to assist them in evaluating their self-funded group dental plan. Claim data was sketchy. The current third party administrator failed to provide adequate claim information to their client. The data appeared suspect to us, and did not support the benefits in place.

We hired an actuary to validate our evaluatation of a start-up dental plan for this group as we were not comfortable in using the suspect data from the group’s third party administrator.

Dental risk is not hard to evaluate and is predictibile.

Based on our actuarial study performed in conjunction with a licensed actuary on the East Coast, we recommended a few benefit changes, with suggested funding to cover the overall cost of the program.

In six months we noticed a trend. Claims were exceeding our projections by a significant factor. Alarmed, we drilled down on the claims in detail.

We found that a significant percentage of claims were incurred in Mexico, yet the charges were billed to several P.O. Box’s on the U.S side, in U.S. dollars. The charges were identical to UCR tables used by underwriters specific to the area on the U.S. side. In other words, instead of charging the normal Mexico fee of $240  or less for a crown, the plan was being charged approx. $850.

Drilling down even further, we found numerous cases wherein a patient would receive as many as 4 crowns in one visit. Ironically, when comparing dates of service to employment records, some of the patients were at two places at one time. Or so it seemed. However, upon questioning, we were told that services were received after work, in the evening, as a typical Mexican dental office offers late hour service to accomondate workers.

We concluded that 75% of the claims were boggus. It was apparent the employees, in conjunction with others, were scamming their employer to the tune of thousands of dollars.

We advised the client to discontinue their dental plan immediately and contact the Texas Department of Insurance fraud division. They agreed to the former, but refused the later. As a federal contractor, they were already under a microscope by federal authorities for possible misuse of federal funds and did not want any more adverse publicity.

Half Guilty, Half Pregnant Harlingen Insurance Agent To Be Sentenced

Monday, November 8th, 2010


Half Guilty, Half Pregnant Arnulfo C. Olivarez, a Harlingen, Texas based insurance agent, is to be sentenced at 9:00 am, November 29 in McAllen, Texas, Judge Ricardo Hinojosa presiding. Prior sentencing dates have been postponed more than six times, so there is no guarantee that this next scheduled sentencing date will not be postponed as well.

In talking with various sources in the know, Molly Mulebriar has learned that Olivarez’s sentencing has been continuously postponed due to an on-going FBI investigation. One Dallas based attorney in the know, told Mulebriar that the FBI and the U.S. Postal Service are following up on leads provided by Olivarez and others, with additional leads in play all weaved through a complicated web.

The FBI announced that further indictments are expected (See FBI News Release – type in “Olivarez” in search box on this blog for additional postings on this matter).

Olivarez plead half guilty to paying bribes to pubic officials in return for lucrative insurance contracts.

At his appearance to plead before Judge Hinojosa, he stated something to the effect “Your Honor, Im not guilty of all the charges, which therefore makes me only half guilty!”  Thus the name “Half Guilty, Half Pregnant Olivarez”.

Olivarez faces up to 20 years in prision and fines.

Editor’s Note: Olivarez was the insurance agent for many political subdivisions in South Texas some of which are PSJA Independent School District, Hidalgo County, Rio Grande City Independent School District, San Benito Independent School District, Roma Independent School District, Harlingen Independent School District, City of Harlingen, Cameron County, Mission Independent School District, Ed Couch Elsa Independent School District, Edinburg Independent School District and others. Annual insurance commissions may have averaged many millions of dollars. We learned for example, through an Open Record Request, the Mission ISD was paying Olivarez $250,000.

If bribery was employed by Mr. Olivarez or others with any of these entities, one would expect the FBI investigation to be prolonged. With recent public corruption indictments in deep South Texas, some taking years to develop iron clad cases, investigators must be short handed and overworked.

 Admitted Felon – Half Guilty Half Pregnant Olivarez

Harlingen Clinic & Doctor Sanctioned

Monday, November 8th, 2010
Harlingen Clinic And Doctor Agree To Halt Sales of Unapproved Medical Devices
By:     Posted: Sunday, November 7, 2010 12:02 am
Harlingen Clinic And Doctor Agree To Halt Sales of Unapproved Medical Devices | brn_har_txbz, Bliss W. Clark,Clark Orthopedics & Rehabilitation,

Texas Business reports:  The Texas Attorney General’s office charged the physician-owner of a Harlingen-based orthopedic clinic with providing unapproved medical devices to patients.

Under a court order obtained by the attorney general’s office, Dr. Bliss W. Clark and Clark Orthopedics & Rehabilitation must pay civil penalties to the State and are prohibited from using unapproved medical devices in the future.

 The defendants provide comprehensive care to Rio Grande Valley patients with degenerative disorders of the hip and knee.

According to state investigators, the defendants improperly acquired arthritis injections from a New Braunfels wholesale distributor that was not licensed to distribute such devices in Texas.

 The injections, Orthovisc, Synvisc and Hyalgan, are used to relieve arthritis-related pain in patients’ knees.

Although the injections are generally approved for use in the United States, the defendants’ wholesale supplier is not licensed to distribute the injections in the State of Texas. As a result, Clark Orthopedics purchased the injections from an unlicensed supplier in violation of Texas law.

In addition, inspectors with the Texas Department of State Health Services’ (DSHS), which referred the case to the attorney general’s office, discovered that the defendants’ Hyalgan and Orthovisc products bore foreign-language labels and were intended for distribution in Turkey.

Because the items were legally intended for export only, DSHS determined they were misbranded devices and unlawful for use in the United States.

The distributor provided invoices to the State indicating that Clark Orthopedics purchased numerous Hyalgan kits, Synvisc and Orthovisc syringes from January 2008 until March 2009.

According to the agreed final judgment, the defendants violated the Texas Deceptive Trade Practices Act and the Health and Safety Code. The defendants must pay $86,000 in civil penalties, attorneys’ fees and investigative costs.

Michigan BCBS Sued For Second Time Over Hospital Contracts

Sunday, November 7th, 2010

Unfair Competition?

Nov 03, 2010

Blue Cross Blue Shield of Michigan is being sued for a second time in two weeks for allegedly pressuring hospitals to sign “most favored nation” contracts that required them to charge competing insurers higher rates.

“The class action suit was filed by The Shane Group Inc. of Hillsdale and Munising resident Bradley A. Veneberg, who say the practice by the state’s largest health insurer leads to inflated prices for health care services,” The Detroit News reports. “They are suing on behalf of likely thousands of Michigan consumers and companies who, since January 2007, have been affected by Blue Cross’ ‘most favored nation’ contracts, said David Fink, one of the attorneys who filed the class action suit last week in federal court in Detroit. The class includes consumers like Veneberg, who have paid co-insurance to a hospital; self-insured employers such as The Shane Group who directly pay hospital expenses for employees; and competitive insurers that paid higher hospital charges because of Blue Cross’ contracts” (Burden, 11/3). 

Business Review West Michigan: “The lawsuit seeks monetary damages, a court order preventing Blue Cross Blue Shield from using or enforcing MFNs, and reforms in contracts between the health insurer and hospitals that strike the clauses” (Sanchez, 11/2).

Crain Detroit Business: “Last month, Michigan Attorney General Mike Cox and the U.S. Department of Justice filed a federal lawsuit in U.S. District Court in Detroit . It asks for the clauses to be removed. In its investigation, the Justice Department and Cox’s office [alleged] that in 2007 Blue Cross threatened to cut payments by up to 16 percent to 45 small and rural hospitals if they did not agree to the most favored nation contracts. Blue Cross also allegedly required 22 larger hospitals to pay more than 20 percent more than Blue Cross rates” (Greene, 11/2).

This is part of Kaiser Health News’ Daily Report – a summary of health policy coverage from more than 300 news organizations. The full summary of the day’s news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.

Editor’s Note: Good read on MFN Contracts –

More Employers May Turn to Self-Insurance in Wake of Healthcare Reform

Tuesday, November 2nd, 2010

MyHealthGuide Source: Matthew Brodsky, Senior Editor/Web Editor, Risk & Insurance® Article

Employers weigh the difficulties of grandfathering their employee-health plans under new federal guidelines versus the opportunities of self-insurance. The self-funded marketplace could win.

After fearing and lobbying against federal health reform, the industry that caters to self-funding employers might actually experience new, profitable opportunities, thanks to the Patient Protection and Affordable Care Act.

In part, it’s because the uncertainty and higher costs that employers are feeling with their employee-health benefits could push more of them to some form of self-insurance.

“Most of the mandates of the healthcare reform weigh more heavily on the fully funded industry,” Anthony Mistretta, an attorney with the Pittsburgh-based HM Insurance Group Inc., told an audience of self-funded employers and vendors at a preconference session at the 30th annual national meeting of the Self-Insurance Institute of America Inc. in Chicago earlier this month.

“I think there’s going to be some opportunities,” he said, explaining that perhaps mid-size and smaller employers that currently purchase health insurance could instead turn toward self-insurance.

Opportunities could come about simply because the status quo might become unbearable or impossible for employers. Employers could be finding the process of grandfathering in their current benefits plan under the new law like having “tied their hands” in terms of plan design and cost savings, as Mark T. Hopkins, senior director of compensation and benefits at manufacturer Mohawk Industries Inc., discovered.

“We basically threw grandfathering out the window,” Hopkins said.

It could seem like a big hassle to have to completely rethink and redesign benefit programs.

On the other hand, employers could take the sunny-side approach and view healthcare reform as a one-time opportunity, as Jay Anliker, president and CEO of third-party administrator UMR, put it.

This could especially be the case for employers that may have never considered self-insurance.

What’s more, benefit brokers are reporting that health carriers are reducing or eliminating their commission schedules to meet the requirements of the minimum-loss ratios in the healthcare-reform law, said Jerry Castelloe, regional president of independent benefits administrator CoreSource Inc.

The country’s largest employers appear to be holding their breath for that clarity. By his estimates, Joe Plumeri, chairman and CEO of Willis and keynote speaker at the conference, said about 98% of Willis clients are not doing anything about healthcare reform yet because they don’t understand it.

Editor’s Note: Agents that  survive in the group health insurance market will be those who focus advising self-funded employer groups on a fee basis. This will entail more than just getting a quote and presenting it to a prospect. It will take a successful agent to have the industry connections necessary to assist in all aspects of a self funded plan, from administration, provider reimbursement expertise couple with direct contract negotiaions with targeted members of the medical community, access to quality stop loss carriers, relationships with captives, and an array of other important components of a cost effective self-funded health care plan. The day of selling a plan off a spreadsheet will gone.

Humana profits rise on lower medical costs

Tuesday, November 2nd, 2010
NEW YORK (Reuters) —Health insurer Humana Inc. posted a sharply higher third-quarter profit that blew past Wall Street targets on Monday, helped by lower medical costs, and it projected growth in its Medicare plans next year.

 Humana, which is highly dependent on its Medicare plans for the elderly, also raised its full-year earnings forecast.

The stock has been a more popular pick than those of rivals this year. Investors have become more comfortable with the outlook for Medicare after the passage of the U.S. health care reform law, while changes affecting plans for individuals and small businesses are keeping Wall Street on edge.

Medical Group Earns $788K Texas Mutual Dividend

Tuesday, November 2nd, 2010

November 2, 2010

Texas Mutual Insurance Co. announced a $788,170 dividend to the Texas Medical Group (TMG). The workers’ compensation purchasing group dividend was based largely on TMG’s loss ratio.

TMG has earned $1,726,338 in Texas Mutual dividends since 2008. By committing to workplace safety and helping injured workers return to productive employment, TMG members improve their chances of qualifying for future dividends. Past dividends are not a guarantee of future dividends.

In addition to potential dividends, TMG members get a discount on their workers’ compensation premium. They also have access to free safety materials, including online videos, pamphlets, videos, DVDs and an industry-specific safety plan.

Any licensed Texas agent can submit qualifying clients for consideration in TMG.

Source: Texas Mutual Insurance Co.

Can Republicans Repeal U.S. Healthcare Overhaul? The Answer is NO

Tuesday, November 2nd, 2010

By Patricia Zengerle
November 2, 2010

Copyright Reuters

Republicans have vowed to repeal and replace President Barack Obama’s healthcare overhaul — or at least obstruct many of its provisions — if they win control of Congress on Tuesday.

National polls show voters are evenly divided on the law dubbed “Obamacare” by its opponents.

Here are some questions and answers about the law’s future:


It will be very difficult, if not impossible, for Republicans to make good on their promise to repeal the healthcare law.

Polls show Republicans are likely to take control of the House of Representatives in the Nov. 2 congressional elections with Democrats hanging onto the Senate..

That makes it unlikely for Republicans to pass any measures to repeal or change the law since both the House and the Senate must agree on any final legislation. Even if Republicans were to win the 60 seats needed to control the Senate, Obama would most likely veto any repeal.

It takes a two-thirds majority in both the House and Senate to override a veto — 290 votes in the House and 67 votes in the Senate if every member votes. But there are not enough seats up for grabs on Nov. 2 for the Republicans to reach 67 in the Senate, and there is insufficient support among Democrats to support a repeal.


They can try to withhold money needed to administer and enforce the law. But, again, they would need control of both chambers of Congress to pass such measures.

Any attempt to block funding also would require 60 votes in the Senate to overcome procedural hurdles and even then would face the threat of a presidential veto.


It could hold hearings on the impact of the health reforms that may sway public opinion against the law and attract support for Republican-backed changes. Such a complex law is bound to run into implementation problems, and the majority party in the House controls committee hearing schedules.


One favorite target is the requirement for employers to offer healthcare insurance to employees or pay a tax penalty. Another is the requirement that all Americans buy health insurance.

Another plan would be to block planned reductions in benefits under Medicare, the government-funded health insurance for older Americans, or scale back the expansion of Medicaid, the existing government healthcare program for the poor.


Some 20 states have launched legal action to overturn the healthcare law, mostly challenging the constitutionality of imposing what they consider unlawful taxes and requiring people to obtain healthcare coverage, a provision known as the ”individual mandate.”

Administration officials and most legal experts say the law will withstand the legal challenge, because the federal government has the ability to levy taxes and the Constitution puts federal government powers above those of states.

Other experts, and opponents of the bill, expect the issue will be considered by the U.S. Supreme Court.

But the case could take years to get to the high court, far longer than the immediate political battle over the bill.


Polls generally show Americans evenly divided on the healthcare law, but fewer than half view it favorably.

The Kaiser Family Foundation’s October health tracking poll showed 42 percent of Americans have favorable views of the new law, 44 percent have unfavorable views and 15 have no opinion. However, most said their feelings about healthcare — for or against — are not a dominant factor in how they will vote for Congress or whether they will even go to the polls.

Obama has recently acknowledged that his administration could have done a better job convincing the public about the program’s benefits.

Still, even some Republicans say the plan may become more popular over time if enough Americans begin to feel it benefits them. That would make it more difficult to convince the public to support repealing or scaling back the law.


Yes. In June 1988 Republican President Ronald Reagan and the Democratic Congress passed the Medicare Catastrophic Coverage Act, which was intended to fill gaps in coverage in the government insurance program for older Americans.

It was celebrated as a bipartisan success that would provide new medical benefits for the elderly. However, older Americans had to pay for it, in the form of an extra Medicare premium and a surtax for people over 65 with higher incomes. The tax led to a protest campaign and Congress, in another bipartisan vote, repealed it in 1989.

Copyright 2010 Reuters.