Pelosi predicts passage of ObamaCare within the next 60 days – urges Dems. to pass bill irregardless of public opinion polls – “We know what is better for Americans than Americans do” is her compelling theme. 
Editor’s Note: The socialists in Washington are not listening. They dont care about you or what you think.
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Editor’s Note: Readers should take advantage of Ernie Clevenger’s weekly newsletter – its free and highly informative.
Texas public school districts purchase limited student accident athletic insurance plans usually through a bid process. Every year districts will receive, on average, four or five bids from interested carriers. The reason there are only four or five bids is because there are usually only four or five carriers in the market in any given year. And, these players change frequently, with some getting out and others, seeking profits, getting in.
Student accident plans are underwritten on an excess basis, i.e, the plans provide secondary cover always. But, in Texas, with one of the nation’s highest uninsured populations, student accident plans, for all practical purposes, are primary policies. Little Johnny breaks his leg at football practice – since his parents have no health insurance at all, the limited student accident plan pays up to it’s benefit maximums and has no other insurance policy to coordinate against.
Marketing expenses for most of these plans are high. Out of every premium dollar, an accounting is established to segregate and book expenses. Administration costs run from 15-22%, agent commissions run up to 15% (split between the writing agent and the Managing General Agent and Master General Agent), and reserves account for about 22%. The balance remaining is available to pay claims.
Policies offered are two fold; a basic plan with limits of up to $25,000 per year, and umbrella cover that takes over at $25,000 and covers expenses up to a limit such as $5,000,000. This seems sufficient but a careful review of plan policy limitations may bring a better understanding of the risk to be assumed by the insured that is not covered by the policy. For example, a football player in South Texas became permanently paralyzed two years ago – his medical care expenses exceeded $500,000 but his student accident plan paid only about $40,000 despite the fact that the policy limit was $5,000,000. His family is now suing the school district’s agent and insurance company.
Several carriers have developed their own proprietary network of physicians whom they tout provide lower than usual health care costs. This is a good marketing ploy, but in reality there are no significant savings to be realized.
Marketing of student athletic insurance is usually through selected brokers who are assigned a territory. These agents/brokers are exclusive marketers. Since there are only a few carriers in this market, these agents and brokers in essence are in a monopolistic position and their success is predisposed to a large degree.
A district’s decision to purchase student athletic insurance is always impacted by athletic directors and their coaches. Their input is important and agents and brokers know this. Thus, strong marketing efforts are directed towards these centers of influence, with hunting trips, seminars, etc., as a proven marketing ploy. There is nothing at all wrong with this, as this is a usual business practice in any business. But, for one to enter this line of business it helps to have a background in school district employment (retired football coach, ex-athletic director, etc.) and access to a nice hunting lease as well.
Texas school districts purchase fully-insured student athletic insurance cover. We know of not one district that self-funds their athletic programs. We find this curious since almost 100% of all Texas public school districts self-fund their group health plans with success (including the TRS ActivCare Plan which is self-funded).
Why don’t districts self-fund their athletic insurance as well?
There are advantages to self-funding. Premium taxes of almost 3% of premium is eliminated. Marketing fees are reduced. Reserves are held and invested by the district, earning investment income. Ability to directly contract with area physicians at lower rates provide additional savings.
There must be a reason districts do not self-fund their athletic insurance plans but do self-fund their million dollar group health plans.
Agents and brokers, who are exclusive marketers, have the most to lose if districts self fund their plans. Lucrative commissions are lost – up to 15% or more of annual premium is paid up-front to the agent every year. Why would agents and brokers want to jeopardize this income? Why would these agents advise their clients of this potential plan saving strategy? They dont.
A district should consider a self-funded approach. Specific stop loss cover can be purchased with a $25,000 retention for about $4 per participant. A third party administrator can be retain to pay claims, on a per claim basis of $10 (maybe even less than $10 per claim). Local doctors can be contracted with at Medicaid rates, a substantial claim savings to the district.
So, who wins in the current athletic insurance market in Texas? It is up to the reader to decide.
Editor’s Note: If school districts were to consider a self-funded athletic insurance program, why not form an Interlocal Agreement, band together regionally, procure stop loss, hire a plan administrator, and self-fund their student athletic insurance?
Amfels, the second largest employer in South Texas located in Brownsville, Texas, has moved their self-funded health plan administration to Group & Pension Administrators Inc. (GPA). The move is signficant since GPA is known in the industry as one of the most progressive and agressive health plan administrators in the country, achieving significant savings for their clients by utilizing unique risk management techniques.
Another large Brownsville, Texas based employer contracted with GPA last year, moving from a local HMO plan. A recent claim study shows that claim costs on a PEPM have been cut in half.
Observers speculate that the Brownsville Independent School District will take note and apply similar strategies to reduce their +$40,000,000 employee health plan expenses.
Editor’s Note: GPA has received national publicity in the past year on their success in reigning in health care costs for their clients. The Dallas Morning News ran a front page article on GPA – Forbes picked up the story as well as other national news sources.
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Copyright ©2003-2010 — Modern Physician. All Rights Reserved. To read more on this breaking news story, visit Modern Physician Online at modernphysician.com! To send us a letter, click here. To subscribe to Modern Physician, our biweekly electronic newsletter To change your email address click here. If you prefer not to receive Modern Physician Alert, click here. Any other inquiries can be directed to Customer Service at 1-888-446-1422 Modern Physician | 360 N. Michigan Ave. | Chicago, IL 60601-3806 | 312-280-3177
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In an Employee Benefit News, February 2010 issue, front page article, “Report Calls PBM Merger Into Question”, critics acuse CVS Caremark of driving up costs for health plans and lowering quality for patients, reducing transparency and hampering oversight for health plans, and compromising the privacy of health plan participants.
“CVS Caremark is currently the only major PBM that is owned by a retail pharmacy chain, and this combined business model has an inherent conflict of interest. As a retailer, CVS Pharmacy has an incentive to drive customers into its stores, fill as many prescriptions as possible, particularly those with high markup, and has little interest in saving health plans money.”
“Of particular interest to health plans and sponsors is the report’s contention that CVS Caremark promotes the use of more expensive brand name drugs over cheaper generics. ”
The article also advises plan sponsors on how to negotiate with their PBM, listing four major points to consider.
Editor’s Note: If you wish to recieve a copy of this article, email Riskmanager@sbcglobal.net
The latest on health reform for Humana brokers
February 24, 2010
Bipartisan summit or partisan theater?
The big story out of Washington for the past week has been that Washington is broken – or, as Time magazine’s cover story puts it, “Washington is frozen.” The morning news shows, the Sunday news shows, the newspapers and magazines are full of stories saying that Congress and the administration are too polarized, too partisan, too politicized for any real work to get done.
In fact, the President, in his weekly address, focused on the problem of doing “what it takes, all of us – Democrats and Republicans – to build a better future for ourselves, our children, and our country.”
“What’s being tested here,” he said, regarding health care reform, “is not just our ability to solve this one problem, but our ability to solve any problem. Right now, Americans…want to see us focus not on scoring points, but on solving problems; not on the next election but on the next generation.”
This highly charged atmosphere, then, is the backdrop for Thursday’s so-called “bipartsian summit” on health reform. The President and congressional leaders from both parties will meet at Blair House starting at 10 a.m. EST. The President’s purpose in calling this meeting, he said, is to make some progress on health reform. He can do that either by winning over some Republicans or by convincing Democrats of the need to go ahead and act alone. He has said he’s open to Republican ideas, but his starting point and focus are on the Democratic plans. The event will be covered by CSPAN.
There are few people who believe the summit will produce any real bipartisan progress. Most believe it will produce partisan theatrics instead.
But the President has posted his plan online, and has urged Republicans to do the same. His plan is a framework that includes mostly provisions already passed by the Senate and the House (see below). Meanwhile, Democrats in the House and Senate are working to come up with a plan that both chambers can pass in the budget reconciliation process without a single Republican vote. Passing a bill through reconciliation would require 218 House votes and 51 in the Senate (budget reconciliation bills cannot be filibustered).
Republicans do not seem compelled to do what the President asked: deliver a comprehensive plan that “protects people from insurance problems, makes sure that the costs are controlled and people who don’t have health insurance are covered.” In fact, they have said they believe changes should not be comprehensive but incremental – that the country can’t afford the cost of a comprehensive bill.
Last Thursday, Senate Minority Leader Mitch McConnell also told the Louisville Rotary Club that he wasn’t afraid of Republicans being called “the party of ‘no.’ ” “I make no apologies for saying, ‘no,’ ” he said. He criticized the reform bills’ costs and the deals cut with members of Congress to win votes, and he argued that Republicans were fighting “an agenda designed to turn us into a Western European country,” implying that the Democrats’ plan is socialized medicine.
What is the President’s plan?
First of all, the President’s “plan” is a framework or a statement of principles. It contains no legislative language. It doesn’t include enough detail for the Congressional Budget Office to be able to score it – that is, to assign it a price – although the White House estimates the cost at $950 billion over 10 years.
The President’s plan sticks largely to the version passed by the Senate on December 24, but offers some concessions to the House. For example, the Senate’s tax on so-called Cadillac health plans – which House Democrats opposed, largely because it would hit union members – has been scaled back. It would be delayed from 2014 to 2018 and wouldn’t kick in for a family of four until the health insurance benefit is worth $27,500 instead of $23,000.
The Obama plan also:
Contains no public plan
Removes the Medicaid deal Ben Nelson got for Nebraska; improves reimbursement rates for new Medicaid eligibles to all states
Offers the same basic insurance reforms that are in the Senate and House bills: no more excluding people for pre-existing conditions; no more charging people more because of health status or gender; no more lifetime limits on benefits; imposes medical loss ratios of 80 to 85 percent
Although the details vary slightly, the overall approach is the same: Everyone must have insurance, with government subsidies for those who make less than $88,000 for a family of four
Does not require businesses to provide health insurance to employees, but penalizes those with more than 50 employees that don’t
Closes Medicare drug benefit “donut hole” coverage gap by 2020
Contains a new provision in neither the House or Senate bill: the creation of a Health Insurance Rate Authority to provide “assistance and oversight to states in conducting reviews of unreasonable rate increases and other unfair practices of insurance plans”
Appears to contain administered pricing for Medicare Advantage plans, with some bonuses for quality and enrollee satisfaction, although no specifics were given
Includes pilot and demonstration projects for delivery system reforms and cost savings
Delays until 2014 the premium assessment on health plans
Create a side-by-side comparison of House, Senate and Obama plans here.
Read the summary of the Obama plan here.
Rate hikes the focal point
The proposed 39 percent rate hike by Anthem Blue Cross of California has had a huge impact on the run-up to the President’s health care summit. In fact, it has provided the administration with a new rallying point for why comprehensive health reform is necessary.
In response to Anthem’s announcement, Secretary of Health and Human Services Kathleen Sebelius released a report called “Insurance Companies Prosper, Families Suffer.” “Leading experts have predicted that, without reform, these increases will continue,” her report says. “All the while, insurance companies and their CEOs continue to thrive… While insurance companies enjoy increasing profits and CEOs take in millions, American families struggle to find and maintain affordable, quality insurance coverage.” Read Sebelius’ report here.
The next day, Sen. Dianne Feinstein, D-Calif., announced she would introduce legislation “to create a Medical Insurance Rate Authority to prevent egregious premium rate increases, like the one recently announced by Anthem Blue Cross of California.”
She called the rate hike “unconscionable…The insurance industry reaps soaring profits by piling massive financial burdens onto consumers.” Then over the weekend, the Obama administration said it would include Sen. Feinstein’s Rate Authority in its health care plan.
From coast to coast, the media jumped on the rate-hike story, saying, as the Louisville Courier-Journal did last weekend, that “Despite a struggling economy, the nation’s five largest health insurance companies increased their profits by a combined 56 percent last year, to $12.2 billion.” But as Alwyn Cassil, public affairs director for the Center for Studying Health System Change, told the writer of that story, the five companies’ profits amounted to less than half a percent of the total spending, “less than a rounding error.”
“I am no apologist for the insurance industry, believe me,” she said. “But this idea that (taking) this $12 billion that they have in profits…would fix our health-care spending problems is just a pipe dream.” Read the Courier-Journal story here.
On Monday, Karen Ignagni, president and CEO of America’s Health Insurance Plans, responded, “There is an enormous amount of attention being paid right now to premium increases for people who obtain coverage in the individual insurance market…The central policy question that should be asked is: What is driving these increases and whether the measures being proposed will work.”
She continued, “But there is a heavy dose of politics at work here. There has been a strenuous effort to focus on health plans because very few policymakers want to take on the real issue of why costs are rising…” Those reasons, she said, include the poor economy, which is causing young and healthy people to drop their insurance; increased utilization of medical care (the Centers for Disease Control announced last week that the use of high-tech diagnostic imaging had tripled between 1996 and 2007); and increased spending for hospitals, physicians and clinical services.
Ignagni continued, “To suggest that cost containment can be achieved by singling out health plans ignores the very inconvenient truth that premium increases reflect increases in the underlying cost of medical services. Regulating premiums won’t do anything to reduce the soaring costs of medical care. This would be like capping the prices auto makers can charge consumers, but letting the steel, rubber, and technology manufacturers charge the auto makers whatever they want.” Read her entire statement here.
Fortune magazine’s list of the 53 most profitable industries placed health insurance and managed care at No. 35, based on 2008 profits that were 2.2 percent of revenue. Yahoo! Finance ranked the 3.4 percent profit margin for health care plans as 88th among 215 industries.
Meantime, two important opinion pages took the rate hikes as evidence of opposite things. A New York Times editorial saw the rate hikes as proof that the Democratic reforms should be passed, while a Wall Street Journal editorial saw them as evidence of what is to come if those reforms do pass, since they don’t address underlying costs.
On the horizon
Medicare Advantage plans would see a small increase in payments from the federal government under preliminary rates released last Friday. The Centers for Medicare and Medicaid Services announced that it estimates a 1.38 percent increase in payments for 2011 prior to any regulatory reductions or adjustments. The final rate will be announced in early April.
Get involved. Contact Congress about health reform at MyHealthReform.org.
Learn more. Explore Humana’s position on health reform and other issues.
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The White House on Monday released President Obama’s newest health care reform proposal, which the President intends to use as the starting point for discussions at a bipartisan health care reform summit scheduled for Thursday. The White House says the proposal bridges the gap between the Senate and House bills and includes new provisions meant to “crack down on waste, fraud and abuse.” Among the provisions in the President’s plan: increasing the threshold for the excise tax on health plans from $23,000 to $27,500 for a family plan, and implementing the same threshold for all plans in 2018; closing the Medicare prescription drug “donut hole;” and creating a new Health Insurance Rate Authority. Close on the heels of the White House website posting, House Republican Leader John Boehner (R-OH) issued a statement that said: “The President has crippled the credibility of this week’s summit by proposing the same massive government takeover of health care based on a partisan bill the American people have already rejected. The best way to protect families and small businesses in this time of economic uncertainty is to start over with a step-by-step approach to health care reform focused on lowering costs, and that’s exactly what Republicans are fighting for.”
Federal
With Congress in recess last week, there is no federal report this week.
States
CALIFORNIA: The federal government has announced $101 million in grants aimed at boosting the use of health information technology in California and training more workers for health care careers. The grants will provide $38.8 million to the California Health and Human Services Agency to develop a health information exchange; $31 million to a variety of organizations statewide for the Cal-REC effort aimed at helping primary care providers adopt electronic health records; and $31.4 million to California community colleges and not-for-profit organizations to train people for health care careers. The Assembly Health committee will hold an informational hearing on February 23 to discuss premium rate increases. Anthem Blue Cross has been asked to testify at the hearing. The chair of the committee, Assembly Member Dave Jones, is expected to introduce legislation to require prior approval before health insurance premiums, co-payments, coinsurance obligations and deductibles can be increased. Similar legislation has been introduced in the past and failed to make it out of the legislature. Jones is running for State insurance Commissioner.
COLORADO: A bill has been introduced that would prohibit insurers from subrogating against liable third parties to recoup medical expenses. Initiated by the Colorado Trial Lawyers Association and supported by the governor, this proposal is anti-consumer and flies in the face of calls for more affordable insurance premiums. The proponents are focusing on the need to make the injured party “whole” by retaining as much of any applicable damage settlement or award without addressing the option of reducing attorney fees. Aetna is working with the National Association of Subrogation Professionals, business groups and other insurers to highlight the adverse impact the bill would have. Also introduced was a bill that would require the Department of Health Care Policy and Financing to create an advisory committee to make recommendations regarding the creation of an all-payer health claims database, and to appoint an executive director to establish the database if sufficient grants, gifts, and donations are received by 2012 to pay for its creation and maintenance. The database will be made available to the public, state agencies, and private entities. Aetna will provide comments based upon its experiences in other states.
CONNECTICUT: In the early rounds of Senate Insurance Committee voting, legislation that would prohibit co-pays for preventive care was defeated. However, the Chair, Sen. Joe Crisco is appealing to his fellow members to change their votes and keep the bill alive as a work in progress. In addition, “prior approval” legislation put forth by the Attorney General and the Health Care Advocate was introduced as expected after the recent media coverage of individual rate increase requests in Connecticut. The bill would require a public hearing prior to any rate approval for individual health insurance policies. It also would authorize the Healthcare Advocate (HCA) or the Attorney General (AG) or both to be a party to the hearing and allow the AG and HCA to charge the payers for any attorneys, actuaries, accountants or other experts the AG and HCA retain in relation to the hearing, at a cost of up to $200,000. The bill would also require plans to give the Commissioner of Insurance 180 days’ written notice of any proposed rate changes, with the hearing to be held no later than 120 days prior to the effective date of the change. A final determination must be issued by the Commissioner no later than 30 days after the hearing. The Commissioner may only approve an individual product rate that is “reasonable.” The bill defines “reasonable” to mean a rate that provides “a fair rate of return to the filer,” taking into account the previous 5 years’ average net income and rate of return not only for the filer, but for the industry as a whole. The bill as currently drafted is the most onerous prior approval proposal to be proposed in the Northeast states. The industry is working to defeat the bill.
GEORGIA: A hearing was held last week regarding the Governor’s proposal for a tax on health plans and hospitals in the state. Many interested parties testified, including the Georgia Association of Health Plans, in opposition to the tax. No vote was taken, and Aetna expects another hearing in two weeks. The legislature has taken a two-week recess to address the budget.
MINNESOTA: The Minnesota legislature convened for the second year of its 2009-10 biennial session on February 4. During the interim, lawmakers focused on ways to reduce the state’s anticipated $1.2 billion budget deficit and how to address cuts in General Assistance Medical Care (GAMC). Based on that work, a bonding bill to establish $1 billion in general obligation bonds and a bill related to jobs and economic development have already been introduced, as have bills related to the GAMC. As usual, several bills to mandate coverage have been introduced including autism, prosthetics, oral chemotherapy drugs on par with intravenous chemotherapy drugs, and routine patient care during clinical trials. Other bills of note include a mandatory extension of COBRA benefits, a bill allowing cross border sale of insurance and expansion of Medicaid programs. We will continue to monitor these bills and other legislative activity until the session adjourns May 16, 2010.
MICHIGAN: This week, Governor Jennifer Granholm introduced an executive order, her first executive directive, to take steps to open the state’s health insurance system to other public employees. Governor Granholm told the Office of the State Employer and the Department of Management and Budget to identify and remove any barriers to other public workers becoming part of the state’s health insurance system that could help reduce employee costs for both the state and local governments. Opening the state’s health care system was part of Ms. Granholm’s proposals to reform retirement and employee costs that she announced last month. School districts, as well as counties, cities, villages and townships, would be able to enroll their workers in the state plan, she said. All of the various state health care systems, including its PPO and health maintenance organizations, would be open to enrollment from public employees.
NEW MEXICO: New Mexico adjourned its 30-day legislative session on February 18, 2010. Two key bills headed to Governor Bill Richardson are SB 148, eliminating the use of gender as a rating factor in individual policies, and HB 12, establishing a minimum benefit ratio of 85 percent for group policies and 75 percent for individual policies less the 4 percent premium tax; resulting in 81 percent and 71 percent, respectively. The latter bills were part of the administration’s health reform package. The governor withdrew a third bill which would have required guarantee issue in the individual market. He has until March 10 to sign the bills.
TEXAS: Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus have asked state agencies to identify possible budget savings that could be applied during the current two-year budget cycle. The move is in anticipation of a multi-billion-dollar budget shortfall expected when lawmakers meet in 2011 to craft the next two-year budget. Health and Human Services Executive Commissioner Thomas Suehs released options and held a hearing last week, saying he “absolutely” is concerned about the potential effect of possible cuts at health and human services agencies. However, the directive for each agency to cut budgets by 5 percent is forcing him to consider the possibility of a provider rate reduction. They total $303.5 million in state funds but would cost Texas another $238 million in federal matching funds. Doctors and advocates for lower-income Texans said cutting reimbursement rates would discourage care providers from taking new Medicaid patients. The cuts would be at least 1 percent and rise to 2 percent for some. After receiving each agency’s proposed cuts, State elected leaders will consider whether the options should be finally implemented. Aetna will continue to follow and have input on this issue as it develops.
Editor’s Note: We get daily emails from numerous insurance companies and other entities giving us continued updates on the insurance industry. This valuable information helps us keep informed and we appreciate the daily emails very much.
