Day: November 5, 2009

Assurant Raises Concerns About Health Care Bill

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In an email received today from Assurant, they offered the following comments about the current bill before the House of Representatives:

– Government prescribed benefit plans are too rich. “Legislators want our insureds to pay no more than 35 % of their total health care costs. Eighty percent of our customers currently pay more than 35% of those costs. They do this to try to keep their premiums down. We believe it is bad public policy to force people to buy benefits they don’t need or want.

– Restrictions on age rating – “Currently, individuals who are 65 pay four times the amount than those who are 20 years old for health insurance. In the House bill, they propose compressing the rating band for age to 2 to 1. If that happens, people under the age of 30 will see a 70% increase in their premiums.”

– New taxes on private insurers – “These are part of the proposed bills. Insurance companies will have to pass these taxes on to their customers, resulting in higher premiums. ”

– Addtional cost-shifting – “The Congressional Budget Office believes Medicare reimbursement will be further reduced. Because Medicare underpays providers, the providers will shift more costs to the private insurers. Ultimately, this cost-shifting also means higher premium prices for health insurance consumers.”

What does all this mean to you? Get ready for your costs to go up 70-100% the minute the Bill passes and goes into effect.

Blue Cross Renewals Appear to Enter New Cycle

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For the past two years, BCBS has been extremely aggressive in writing and maintaing  new business, with rates well below the market. Bloated BCBS sales reps have reaped the benefits of well paid order takers, to the envy of their competitors.

That cycle appears to be over, as BCBS has come in with some renewals lately in excess of +100%. This is not uncommon in the group health insurance business. One year ABC Insurance Company may have the best and lowest overall rates, and write a lot of business, while the next year XYZ Insurance Company will do so. Seems this phenonomen runs in 2-3 year cycles.

Who is the new and agressive carrier these days? Try Cigna on your next renewal, you may be pleased.  cigna_healthcare_logo

A note to all carrier representatives: “You will only be as successful as your underwriter wants you to be.”

Why Insurance Agents Fear Insurance Companies

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THIS ARTICLE WAS POSTED EARLIER THIS YEAR. WE ARE RE-POSTING IT BECAUSE WE HAVE LEARNED OF A BUCA WHO WROTE AN EMAIL TO A BROKER THREATENING TO CANCEL HIS CONTRACT IF HE CONTINUED TO PLACE BUSINESS WITH A CERTAIN TEXAS BASED TPA. THESE KINDS OF MAFIA TACTICS HAVE NO PLACE IN THE INSURANCE INDUSTRY. EMPLOYERS ULTIMATELY PAY THE PRICE – A “SHAKE DOWN” ON A CORPORATE LEVEL SHOULD BE CONDEMNED. YET, BROKERS WHOSE SOLE SOURCE OF INCOME IS CONTROLLED BY A FEW INSURANCE COMPANIES, REACT IN FEAR. THEY FALL INTO LOCK-STEP WITH THOSE THAT CONTROL THEM.

Brokers are beholden to the insurance companies they represent and know that moving business from them can bring them severe economic disaster. Every agent contract we have reviewed allow the carrier to terminate the agent/broker appointment at any time without cause. Overrides and bonuses (often not disclosed to the customer) based on production have the intended effect of “capturing” the agents self-interests controlled by the insurance company he represents. The broker/agent is thus held hostage by the insurance company at the expense of the interests of his client. This conflict of interest is not clearly understood by most employers who purchase insurance through independent brokers.

Insurance brokers fear insurance companies because they know the carriers  can, and have, terminated agent contracts at will.

We know of many instances wherein a carrier has terminated an agent’s contract without cause, leaving the agent without commission income earned through his efforts on behalf of the carrier he represented.  We have also had a carrier group representative boast to us that he was about to have his company terminate a local broker’s contract because “he moved a major account from us last month and we dont think he gave us a fair shot at renewing it.”

Employers should demand full disclosure of all compensation earned by their agent/broker. This should include bonuses, overrides, servicing fees, commissions, vacations, vouchers and anything else of value. And, it should be contained within a  written contract between the employer and the agent/broker.

Cost Plus Hospital Reimbursement – Will Hospitals Refuse to Treat You?

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Cost-plus hospital reimbursement is nothing new. Years ago Blue Cross paid member hospitals their cost plus 7%. An annuity feature in their hospital contract assured participating hospitals of a steady cash flow, which is still a feature found today in a standard BCBS hospital contract (we have a complete copy of the BCBS hospital contract).

Cost plus has saved our clients on average +40% in hard dollar claims. We have not had any hospital refuse to see our members – we guarantee each hospital a fair profit; we do not promise them an open checkbook.

Yet, many brokers are advising their clients to avoid the cost-plus approach. They use fear tactics to scare their clients, such as, “if you pay hospitals on a cost plus basis, they will retaliate and refuse to admit any of your employees or family members!”

If the cost-plus approach saves their clients 40% or more in claims, and is something that BCBS pioneered many years ago, why would a broker be against the concept? After all, isnt the broker acting as an agent of the employer who pays him?

Let’s put this in perspective. Consider the cost-plus approach as kind of like buying a car. If I go to a dealership and bargain long and hard for that nice shiny new truck with a $48,000 sticker price, and get the dealer to sell it to you for $23,000, can you imagine the following dinner table discussion later that evening:

 You: Man, I really screwed Chevrolet this afternoon. They wanted $48,000. They dropped the price down to $45,000 but I held out, showing them their costs which I found on a website. The sales manager told me the information I got off the internet was wrong, but that he could give me the truck for $43,000, as long as I didnt report him to the Dealership Sales Manager. After two hours of intense haggling, I got the price down to $23,000. The salesman was smiling, but his manager said that they were losing money on this sale but that they would make it up on the next pigeon.

 Your Spouse: Oh Nooooooooooooo…………………………you should never have done that! Our whole family is going to be Black Listed now! The dealership will probably tell all our friends how bad we are. THEY WILL NEVER AGAIN LET US BUY A CAR OR TRUCK FROM THEM!!!!!!!

You: Damn, I never thought of that! I feel really bad now. What should I do?

 Your Significant Other: Go back immediately and tell them you are sorry. Give them a blank check and tell them to fill it out for you, for any amount they normally charge pigeons.