Archive for June, 2010

Bad Hair Day in Brownsville, Texas

Wednesday, June 30th, 2010

 Hurricane Alex wrecks havoc on Morris’s Hairdo

Mini-Med Plans are Dead

Wednesday, June 30th, 2010

On all mini-med renewals after 23 September 2010 mini-meds must upgrade maximum coverage to a minimum of $750,000. This effectively kills mini-med plans and will leave millions of Americans without coverage of any kind.

Editor’s Note: Medicaid to the rescue!

US Health Insurance Companies Eye Overseas Opportunities

Tuesday, June 29th, 2010

With the Health Care Reform Bill passage, some U.S. health insurance companies are eyeing lucrative overseas opportunities with renewed interest.  While the U.S. market accounts for 80% of the global health insurance market, it represents only 4.6% of the world’s population. Opportunities abound overseas.

India and Turkey tops Cigna’s list of countries it plans to soon focus on. That would add to its current presence in 27 countries and jurisdictions. Cigna stepped into the Chinese market in 2003 in a joint venture with an affiliate of the China Merchant Group. Today Cigna has 10 offices and nearly 2,400 employees in China.

Humana and United HealthCare are expanding their business model overseas as well.

Aetna has entered the Chinese market and currently has approximately 400,000 members enrolled.  Wellpoint has too.

American health insurers will compete with BUPA for global market share.

Editor’s Note: Business opportunities abound for those that have the ability to marry needs to solutions in an economical feasible manner.

Monday, June 28th, 2010

Click image to zoom out – Turn track onDownload GIS data [Image of 3-day forecast and coastal areas under a warning or a watch]

Insurance Bidding Irregularities? Will Brownsville ISD Implode?

Monday, June 28th, 2010

ZAYAS & ZEALOTS FACE DAY IN COURT!!!

 Incumbent Insurance Agent Donates $50,000 to his own client.
A federal judge has dealt a stunning setback to the Brownsville Independent School District and the majority of the board by finding that former district chief financial officer Antonio Juarez to proceed with his lawsuit charging them as the district with retaliation and denying the defendants qualified immunity to his claim of retaliation. In an 18-page memorandum opinion and order, U.S. District Judge Andrew S. Hanen on June 23 said a jury should hear the suit in federal court after denying the BISD and the majority of the board their request for a summary judgement against the former CFO’s charges. Hanen said Juarez had successfully raised issues of fact that the defendants – individually and as BISD officials – must go before a jury to let them decide.
Hanen traced the origins of the case to the recommendation by Juarez to the board that they grant the district’s stop-loss insurance contract to American Administration General. Evidence indicated that at least three trustees – Joe Colunga, Rolando Aguilar, and Ruben Cortez – objected strongly to his recommendation that ultimately culminated in them ordering former superintendent Hector Gonzales to terminate his employment with the district.
Juarez started working for the BISD as its CFO in the fall of 2008. One of his duties was to make insurance recommendations to the BISD board of trustees. On Sept. 16, Juarez recommended that the district select AAG as its stop-loss carrier. At the heart of the dispute is Juarez’s claim that he was demoted and ultimately terminated from employment by the BISD and the defendants personally because he recommend that the board award Health Smart (AGG) the district’s $40 million stop loss insurance policy instead of to Oklahoma-based Mutual Assurance Administrators, Inc.
On Aug. 12, trustees awarded that contract for the 2009-2010 to MAA for $181,275 per month with an estimated worth as much as $40 million. At the time of the award, HealthSmart complained that its contract renewal efforts did not receive fair consideration by the district’s Employee Insurance Committee or the Board of Trustees. Sources also said that the four votes on the majority – board President Aguilar and trustees Colunga, Cortez and Rick Zayas – were acting in concert to award the lucrative contract to the company brokered by local insurance mogul Johnny Cavazos, who stands to pocket $4 million in commissions.Trustees Enrique Escobedo, Catalina Presas-Garcia and Minerva Peña voted against it. They are not named as defendants in the Juarez lawsuit. According to testimony in deposition by Gonzales, three of the defendants (Colunga, Aguilar and Cortez) accused Juarez of misinforming the board regarding the recommendation. Two of the trustees (Cortez andf Colunga) were adamantly opposed to the AAG recommendation, and after the meeting, both Colunga and Cortez met with Gonzales and said that they were lied to by Juarez. Gonzales said he would “look into it.” Then, in the following meeting, Cortez requested a consent item be placed on the agenda. The item was described as “discussion and possible action related to the apparent misinformation directed to the BISD board members at the last regularly scheduled meeting.” After the November meeting, Gonzales spoke with Juarez. Gonzales told him that the board “was upset with him, and that (Gonzales) was to terminate him” or else Gonzales would “suffer consequences.” There followed a series of events involving the transfer of Kent Whittemore from a warehouse position to the insurance department. Whittemore later filed a grievance against Juarez alleging that Juarez had not spoken truthfully to the board regarding whether the district’s consultant agreed with the insurance recommendation. Hanen said Juarez charged that this tactic – having employees file grievances against one another – was a de facto policy by board members to justify terminating them, as later happened to Gonzales. There followed a series of meetings between BISD employee Elizabeth Brito-Hatcher and former trustee Otis Powers, two of which were tape recorded by Juarez, where these individuals implicated four members (Zayas, Cortez, Aguilar and Colunga) in a conspiracy to have Juarez file a grievance against Gonzales. The message from Powers, which he attributed to various defendants, was that if Juarez would file the grievance against Gonzales and blame him for the statement about the insurance recommendation, Juarez would get his job back. During that meeting, Powers detailed “irregularities” in the board’s contracting procedures – for example, paying a woman without authorization and then trying to develop a contract to backdate to when they began paying her. Moreover, Powers noted that such behavior by the board was not uncommon, saying “they have always paid people like that, we have more than just her.”
A sample of the taped conversation between Powers and Juarez follows: Powers: Here’s the thing, the board hates Hector Gonzales.. Juarez: How do I handle it (the grievance)? You…ah, personally, you have to get Hector back. He told you what to do and why you had to do it. Did I talk to Colunga for you? Aguilar for you? I talked to them all, even Rick Zayas. The only one I didn’t talk to is Ruben (Cortez) too much. (Doc. 55, Att. 5)
Instead of going along with the conspiracy, Juarez filed a grievance against the majority of the board alleging they had violated the Open Meeting Act, and that the board had conspired in manipulating the insurance bidding procedures, and that the current and former trustees had attempted to engage him in a conspiracy to oust Gonzales. Then, on Jan 15, 2009, Juarez and his attorney Ben Neece met with two FBI agents and disclosed his belief that “the trustee defendants were manipulating the bidding process for the district’s stop gap insurance coverage. During that meeting, Juarez told the agents that Powers had asked him to file a false grievance report against Gonzales and played the recording of the Brito-Hatcher conversation for the agents. During the hearing on the Whittemore grievance, Juarez’s attorney objected to the proceedings charging that there had been “circumvention of…due process in this case though the use of bribery, coercion, and conspiracy…” He also stated that should the board rule against his client, “we feel that any action will be retaliation. I think the board is aware that Mr. Juarez has reported this activity to law enforcement agencies.” Following that meeting, Juarez’s original contract as CFO, the position from which he had resigned, was not renewed, and Juarez was also not offered a contract renewal for the position of Grants Administrator, which he had occupied following his conversation with Gonzales. As a result of these actions, Hanen found that Juarez had provided enough evidence to press forward with his claim in federal court and also found that he had provided enough facts to “establish(ing) that the official’s allegedly wrongful conduct violated clearly established law and that genuine issues of material fact exist regarding the reasonableness of the official’s conduct” and that those actions violated a constitutional right. Although Hanen said Juarez had not proven that he did not have a legitimate claim of entitlement to continued employment, he ruled that the non-renewal of his position might have been a retaliation and violated his First Amendment rights because his speech involved a matter of public concern, and that his interest in speaking outweighed the governmental defendant’s interest in promoting efficiency and that the protected speech motivated the defendant’s conduct. ” (BISD counsel) Mike Saldaña kept telling Zayas that the case would get thrown out of court,” said a former board member. “They never expected that they would have to answer in court for what they were doing. This doesn’t look good for the Gang of $4, especially with the reelection of Zayas and Cortez coming up in November.”
Editor’s Note: This appeared in El Rocinante, a local Brownsville Blog

Thursday, June 24th, 2010

The Future of Fully-Insured Health Plans
A candid personal health reform insight from SPBA President Fred Hunt

I first forecasted the probable restrictions on health insurance companies plus ramifications on employers who buy fully-insured employee health coverage.  Since then, I have received requests from employers, agents, brokers, TPAs and others to give a speech to explain the future for fully-insured health plans compared to self-funding.  Please consider this a “virtual speech”.

I predict health insurance companies will withdraw from the US market within a year or two.  Sadly, insurance companies became the political scapegoat of health reform, and so, many of the reforms spotlight insurance companies for limitations & requirements that are guaranteed losers. It simply will not make sense to insurance companies and their investors & owners to lose hundreds of millions of dollars.

For example, the Median Loss Ratio (MLR) requirements will limit insurers to only 15% of premium dollars for non-medical expenses (20% for individual policies).  That pretty much cuts out brokers & agents and many of the top-heavy operations of insurance companies…unless those insurers do like airlines and start adding all sorts of separate add-on costs.  However, employers will resent the extra costs as simply more expense.

Meanwhile, States are being given millions of health reform dollars to beef up their capacity to second-guess and deny premium levels.  In most cases, the level of premiums that will be approved or rejected will be influenced by politics, not actuarial or market costs.  One state official described the result for insurance companies as being “a train wreck”.  So, insurance companies will not be able to set premiums at levels their actuaries say are needed.

Insurers will be able to participate in state exchanges.  However, Massachusetts ’ existing program is the model, and the major insurance companies in that program each lost tens of millions of dollars just in the first quarter of 2010.  What insurance  company wants to stay in a market where they are losing tens of millions of dollars every few months.

Sadly, there are more and more restrictions & disincentives for health insurance companies in health reform and the emerging regulations.  It becomes an unsustainable no-win marketplace for insurance companies to continue to sell employee benefit health coverage.  

What is going on is sad and unfair…but it is now entrenched, and health insurance will disappear just as many car companies found it too hard to compete in the marketplace, and their product disappeared.  On the brighter side, about a year ago, several insurance companies foresaw the possibility of the market in the US for fully-insured health policies & plans disappearing for whatever reasons.  Those insurance companies began to research alternative markets if they withdrew from the US market.  That research has yielded promising results in several Asian & European countries, where citizens are impatient with their government-run health coverage, and are willing to buy their own coverage.  Insurers expect little or no government interference such as premium amounts, HIPAA, COBRA, etc. etc. in these foreign countries.  So, fully-insured health plans will survive, just not in this country.

What about self-funding?  By definition, self-funded plans, have no profits, most have fiduciary protections,  so the punitive restrictions forced on health insurance companies do not apply.  Also, there is much more control & flexibility for employers to design and administer their plans for the wants & needs of each particular workforce.  So, the kinds of controls, limits and governmental second-guessing are not involved.

Don’t get me wrong, everything involved in health is going to be a bureaucratic hassle and intrusive for medical providers, health payers, employers and workers.  Self-funding is no exception, and there will be several new added required or desired administrative services for employers to pay.  However, think of health reform as an obstacle course for self-funding, but a deadly minefield for insurance companies.

Insurance companies had already been delving into offering self-funded plans and providing administrative services only (ASO).  They can continue in that market, although, the increase in the quantity and sophistication of administration and added services is going to require re-tooling from the very different thinking & laws of insurance law to the very different employee benefits & ERISA law.

What about grandfathering and the President’s frequent promise “if you like the coverage you have now you can keep it”?  Grandfathering is an illusion.  It is temporary and does not protect from the most demanding requirements.  Also, it is very delicate.  Many logical or necessary changes to a plan will terminate grandfather status.  So, no one should be under the illusion that grandfather status is worth much or will protect for very long.  So, grandfathering should not be the decisive factor of anyone’s benefits planning.

Fred Hunt
SPBA President

I began my employee benefits career as a young eye witness when ERISA was being drafted and shaped in 1974.  At that time, almost everyone forecast that ERISA would spell the end of employee benefits, which is why insurers and others worked hard to avoid inclusion.  I did not feel that it was the end.  That lesson has taught me not to declare drastic outcomes of every major health reform & mandate since.  This insight about the future of  health insurance companies is my first dire forecast, and is mostly based on dollars & cents business survival factors for insurers.  No business can afford the endless hundreds of millions of dollars of losses being forced on insurers.   This is not gloating.  This is a sad situation.

SPBA is the national association of Third Party Administrators (TPAs) who provide comprehensive ongoing services to client employee benefit plans & employers.  It is estimated that 52-55% of US covered employees are in plans using some degree of services from such TPAs.  SPBA also achieves unique perspective, because clients include every size & format of employment , and every form of funding (self-funding, insured, HMO, CDHP) are provided by some SPBA members, so there is no us-versus-them slant.  We are simply seeing a sad historical event as an era ends.

Editor’s Note: The following was received from a physician friend of ours in San Antonio:

Some who have fought with insurers over the years would cheer this development.  But with what will they be replaced?  Be careful what you wish for.  Government intervention into this ‘business’ will NOT be good for providers or patients.  Of that I am certain.

 If true, this has serious implications for our existing managed care contracts.  Who will be the payers that will replace the current insurers?  If it’s a government entity or government controlled entity, they will quickly dictate the terms and the fees, and that will be that.  Then it will be the efficient providers who will prevail.  Everyone else will go out of business, and have to merge with the efficient groups. 

The shift is beginning to occur.  Right now, two existing large Cardiology groups in San Antonio have either gone bankrupt and/or are in the process of being purchased by hospitals.  The Medicare fiasco has brought significant cash flow problems to practices that are heavily dependent on Medicare such that many of them are having to borrow money to meet expenses.  A cynic might argue that there’s a method in the madness that Congress is going through right now with the lack of an SGR fix.  It may be having the intended effect of wringing out some of the inefficiencies in medical practices. 

 Also, the move for hospitals to acquire specialty medical practices is being driven by higher reimbursements for procedures in a hospital setting (yes, I know, go figure), and what everyone believes will be the evolution of the ACO’s, whatever that will end up looking like.

 We live in interesting times.  In 3 years, the healthcare system is going to look entirely different than it does now.  And physicians will be along for the ride.  Get ready, everyone.  It’s going to be bumpy.

We also received this response from a stop loss carrier: 

Good article, I am attending a health conference, and they too noted that it would not be worth the expense to stay “grandfather”.  It would cost too much. Beware of consultants who push this direction ,   As of now SL appear to be in good position.  However once the “O” figures it out he will come after us.

Visitor Traffic Up – IP Addresses Impressive

Tuesday, June 22nd, 2010

Molly Mulebriar, webmaster for this site, wishes to thank the many daily visitors who peruse our blolg. A review of IP addresses illustrates the wide range of viewers with interesting registrations. Many are large corporate entities utilizaing both domestic and foreign registration domains. A special welcome is extended to Midlothan registrants.

How to Read A Business Contract

Monday, June 21st, 2010

Most employers who purchase group health insurance never read their contracts – they simply sign them and rely upon verbal representations.

This is a very good, short 2 minute video on How to Read A Business Contract – http://www.5min.com/Video/How-to-Read-a-Business-Contract-34095256

Health Insurance Brokers Face Compensation Changes

Saturday, June 19th, 2010

With the advent of more federal intervention in our health care delivery system, health insurance brokers are concerned for their future. Will they still play a role as the national health care bill takes hold, and if so will they survive financially at the same level of compensation they have come to demand and expect?

Some health insurance brokers will remain active, but many will exit the business. Those that remain will not play as important a role as in the past, but will simply be technocrats and service representatives for a small handful of insurance carriers still active in the market.

Compensation will be paid on a limited per employee basis. For example, the Utah Insurance Exchange (yes, Utah has already set up their own exchange) pays brokers $37 per employee per month commission. One of the BUCA’s is contemplating paying a standard broker commission of $10 per employee per month. This compensation would be separate from the premium calculation and paid through a service agreement with the broker, so as to not jeopardize the Minimum Loss Ratio requirement due to take effective  in January 2011.

How does that compensation compare to todays lucrative health insurance broker compensation package? “Dismal” is the first adjective that comes to mind. A “disaster” is another view and “suicide” a more attractive and viable alternative for some brokers too old (or lazy)  to enter a new profession.

Times are changing, and changing fast. Is “Hope and Change” an oxymoron?

Saturday, June 19th, 2010
Thursday, June 17, 2010, 4:12pm EDT

HM Insurance buys Mutual of Omaha line

Pittsburgh Business Times – by Kris B. Mamula

HM Life Insurance Co. has reached an agreement to acquire Mutual of Omaha’s employer stop loss line, making parent HM Insurance Group among the biggest employer stop loss carriers in the country, the Downtown Pittsburgh company announced on Thursday.

The transaction, which is subject to regulatory approvals, is effective July 1.

“The block complements our current stop loss distribution channel, allows us to achieve greater economies of scale and supports our strategic direction as an expert in health risk solutions,” Michael Sullivan, president and COO of HM Insurance Group, a Highmark company, said in a prepared statement.

The Mutual of Omaha stop loss block of business, with approximately $100 million in annual premiums, will grow HM’s current block of $420 million in premiums by nearly 25 percent, Sullivan noted in the statement. Stop loss insurance is designed to protect self-funded health insurance plans from catastrophic losses.

Read more: HM Insurance buys Mutual of Omaha line – Pittsburgh Business Times

Is Cost-Plus Health Care Finance Doomed?

Monday, June 14th, 2010

Managed care isn’t working and everyone knows it. PPO discounts are touted to be significant and substantial, yet health care costs keep going up every year.

Enter Cost-Plus health care financing.

Cost-Plus health care financing makes sense to a growing number to Texas employers. Since hospitals publish their cost-to-charge ratios with the federal government, some employers are using that as a benchmark to reimburse hospitals their cost, plus a profit margin that is fair and reasonable.

As Cost-Plus grows and more employers jump on the cost-plus band wagon, what will hospitals do to fight this transparent intrusion into their financial ledgers to protect profits?

In the scheme of things, one might conclude that a market driven cost-plus approach to financing health care, if ultimately pervasive within the health care delivery system, could ultimately serve the function of insuring that hospitals have enough income to recover their costs. But the rub lays in the ability of the hospitals to increase their incomes and the only way to do that would be  to increase their costs, a perverse notion in a free enterprise capitalist system.

So, one could conclude that as the cost-plus health care financing phenomenon takes hold, costs will increase at probably the same level as we have experienced under managed care for the past 20+ years. After all, everyone deserves to make a profit.

Editor’s Note: Molly “Tsun Su” Mulebriar writes: “For every point of view, the is an opposite point of view worth discussing. It is in everyone’s best interests to consider all possibilities to be better prepared in the future. Knowing your enemy is the first step towards ultimate victory.”

Blue Cross VS Pfizer

Monday, June 14th, 2010

Blue Cross Names and Shames Pfizer Execs Linked to Massages-for-Prescriptions Push

By Jim Edwards | Jun 10, 2010

Blue Cross Blue Shield’s lawsuit against Pfizer (PFE) to recoup money it overpaid for Bextra and other drugs that were promoted for unapproved, “off-label” uses gives an idea of just how bad the “Bad Old Days” of drug marketing really were. Blue Cross claims Pfizer bought airfare to Caribbean resorts for 5,000 doctors who also received up to $2,000 “honoraria” each, plus golf games and massages just for listening to lectures about the now-withdrawn painkiller.

Blue Cross has also introduced a new tactic into the legal game of attempting to recover monies paid for illegally promoted pharmaceuticals: it names individual Pfizer executives as defendants, presumably in an attempt to “name and shame” them. Previously, plaintiffs in similar cases just sued the company they wanted money from.

The suit doesn’t say the named executives specifically arranged the trips. Rather, it accuses them of preparing sales materials to convince doctors to use Bextra for surgical pain, an off-label use, among other acts. Pfizer says:

This is a case of an insurance company seeking its money back for medicines that physicians prescribed appropriately using their best medical judgments.  Pfizer denies the allegations brought by the insurer in this case.

Most of the allegations are not new — they’re based on the $2.3 billion settlement Pfizer reached with the feds in 2009. (Disclosure: They’re also based on three stories I previously published on BNET: see related stories below.)

But Blue Cross does provide some numbers that indicate the massive scale of Pfizer’s infamous Bextra business:

Pharmacia paid targeted physicians both airfare and two to three days’ accommodations at lavish resorts in the Bahamas, Virgin Islands and across the United States. Pharmacia further entertained these physicians with golf, massages and other recreational activities. And Pharmacia paid them honoraria between $1,000 and $2,000 for attending. The number of attendees at this event often ranged from 50-100 health care professionals.

Pharmacia held almost 100 of these meetings. By simple arithmetic, Pharmacia thus promoted unapproved uses and dosages of Bextra to and provided entertainment for over 5,000 health care professionals.

The executives named as defendants are Rick Burch, a former svp who planned and launched Lyrica; Jake Friedman, a former vp of sales responsible for promoting Lyrica and Geodon; Pfizer’s executive director Mark Brown; and Matthew Lustig, a former South Florida district sales manager, who distributed documents to sales agents who promoted Bextra, Blue Cross says.

The most interesting name there is Lustig’s: He’s the least senior person on that list. At a company of Pfizer’s size, he’s pretty low on the totem pole, especially as it’s quite well established that Pfizer’s off-label push for Bextra was backed by management.

Blue Cross appears to be sending a message to all Pfizer employees, no matter how lowly: Don’t push off-label drugs onto patients we cover, because we’re taking names.

2011 Group Health Costs To Increase

Monday, June 14th, 2010
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Report: Employers to see 2011 medical costs jump

 

 Email this Story

Jun 14, 2:36 AM (ET)

By TOM MURPHY

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INDIANAPOLIS (AP) – Companies that offer employee health insurance expect another steep jump in medical costs next year, and more will ask workers to share a bigger chunk of the expense, according to a new PricewaterhouseCoopers report.

For the first time, most of the American workforce is expected to have health insurance deductibles of $400 or more, the consulting firm said in a report released to The Associated Press.

Deductibles are the annual amount a patient pays out of pocket for care before insurance coverage starts. They are generally separate from co-payments and coinsurance.

Two years ago, only 25 percent of companies participating in the annual survey said they asked employees to pay deductibles of $400 or more. That grew to 43 percent in 2010 and is expected to pass 50 percent next year.

Employees who are asked to pay more through things like higher deductibles help keep cost growth in check because they use less health care.

The health care reform law passed by Congress and then signed by President Obama in March has just started to unfold and will have little impact on costs next year, said Michael Thompson, a principal with PricewaterhouseCoopers.

“In general, it’s a continuation of a fairly high rate of medical inflation,” he said.

PricewaterhouseCoopers found that medical costs are expected to rise 9 percent next year. But this doesn’t mean workers will see their monthly premiums jump by the same amount.

Employers typically try to soften the impact of a cost increase by absorbing some of it, changing insurance plan designs or asking employees to pay higher deductibles or a larger coinsurance percentage.

For instance, a medical cost increase of more than 9 percent was forecast for 2009. But the average annual premium rose only 5 percent for family coverage that year and stayed flat for single coverage, according to a separate study from the Kaiser Family Foundation.

The 9 percent medical cost increase projected in 2011 is actually slightly smaller than the 9.5 percent jump PricewaterhouseCoopers is seeing this year. Thompson said several top-selling drugs will lose patent protection next year and become exposed to lower-cost generic competition. That will help temper the increase.

The PricewaterhouseCoopers report also found a steep drop in the percentage of employers that subsidize retiree health coverage. It said only 22 percent of employers with more than 5,000 workers subsidized retiree coverage after age 65 this year. That’s down from 37 percent in 2009.

“It’s a major cost and one that employers have for years now been moving away from,” Thompson said.

PricewaterhouseCoopers compiled its report by analyzing e-mail survey results from 674 companies in 30 different industries across the country. Most of the companies participating had 1,000 employees or more. The firm also interviewed health plan executives and reviewed analyst reports.

Editor’s Note: The self-funded groups we currently manage wll not see increases in costs in 2011.


Hospital Reimbursement Models

Friday, June 11th, 2010

This article walks you through three hospital reimbursement models; Cost based reimbursement (cost plus), prospective payment and capitation – http://www.itdl.org/Journal/May_09/article03.htm

Top Ten Lies

Friday, June 11th, 2010

1. Hospitals lose money on Medicare patients

2. PPO discounts are meaningful

3. Fee Based Insurance Consultants are Not Biased

4. Health Insurance Companies Make Enormous Profits

5. Physicians are Good Businessmen

6. PBM Contracts are transparent

7. Insurance Agents and Brokers Work in the Best Interest of their Clients

8. Stop Loss Carriers Pay According to ERISA guildlines

9. Most Contracts Do Not Contain Evergreen Clause

10. ObamaCare will Lower Health Care Costs

Daily Quiz

Friday, June 11th, 2010

We have received a confidential memorandum from a Texas hospital that stipulates a major health insurance company operating within the state pays out-of-network hospitals Medicare +20%.  Which health insurance company does this:

_____Aetna _____Blue Cross _____Cigna _____ United Healthcare _____ Humana _____ Shifting Sands Mutual

3 Texas Hospitals Agree to Cost-Plus Reimbursement Methodology

Friday, June 11th, 2010

Three Texas hospitals, independent of each other, have agreed to accept cost-plus reimbursment provided on in-patient and out-patient services for their own employee benefit program. Hospital employees who seek medical treatment at hospitals other than their own, will have their claims priced at cost-plus 12%.

These three hospitals see the value of cost-plus. Most consumers would agree that a 12% profit margin is fair and reasonable.

 

Drug War!

Thursday, June 10th, 2010

A Dispute Over Filling Prescriptions

By REED ABELSON and NATASHA SINGER
Published: June 9, 2010

A fight has broken out between the nation’s biggest drugstore chains, Walgreen and CVS Caremark, potentially affecting where millions of consumers can fill their prescriptions.

J.B. Reed/Bloomberg News

A Walgreen store in New York. The chain has about 7,500 stores nationwide.

On Monday, Walgreen, which operates about 7,500 drugstores across the country, announced it would not participate as a prescription drug provider for customers in new drug benefit plans administered by CVS Caremark.

CVS Caremark, besides operating more than 7,000 of its own drugstores, is also a leading provider of prescription drug benefit plans that many employers offer workers and their dependents.

On Wednesday, CVS Caremark countered the Walgreen move. The company said that anyone now enrolled in its drug benefit plans would have to stop filling their prescriptions at Walgreen within a month.

“It’s a real big game of chicken, and I don’t know who’s going to win this one,” said Edward A. Kaplan, a benefits expert at the Segal Company, a consultant to big employers.

Mr. Kaplan said he was working with employers to determine how many of their workers might be affected if they were forced to stop using Walgreen under their plans.

Smaller drugstore operators had already raised antitrust concerns against CVS Caremark, citing potential conflicts caused by its dual role as a pharmacy chain and a drug plan administrator. The National Community Pharmacists Association, which represents independent drugstores, said the Federal Trade Commission was investigating its accusations of anti-competitive practices by CVS Caremark.

The commission confirmed the investigation but declined to comment on the nature of the inquiry.

Attorneys general in 24 states are conducting a similar investigation, according to CVS Caremark.

In a statement, CVS Caremark said Wednesday it remained “confident that our business practices and service offerings are being conducted in compliance with antitrust laws.”

While CVS Caremark said that the vast majority of customers could easily find a nearby pharmacy other than Walgreen, Mr. Kaplan and other benefits consultants said the standoff could be disruptive.

In certain companies, they say, as many as 20 to 30 percent of employees enrolled in plans administered by CVS Caremark are filling their prescriptions at Walgreen. For those corporations, “it is significant,” said David Dross, an executive for the consultant Mercer who advises companies on pharmacy benefits.

This dispute, of course, could be brinksmanship of the sort that frequently occurs between health insurance plans and hospitals, in which consumers are threatened with the possibility of their hospital’s being dropped from an insurer’s network until the two parties finally reach an agreement on how much the hospital should be paid.

In deciding to drop Walgreen before Walgreen could drop it, CVS Caremark said it was simply reacting to its rival’s attempt to extract higher payments for the drugs that CVS Caremark enrollees buy at its stores.

“Walgreen’s announcement was nothing more than a transparent attempt to try to raise the pharmacy reimbursement rates it receives from CVS Caremark,” the company said in a statement on Wednesday.

Besides battling over drugstore customers, Walgreen and CVS Caremark compete to a lesser extent in providing employee drug benefit plans, although CVS Caremark is a much bigger player in that field.

The two companies “are effectively choosing to be direct competitors in administering plan benefits as well as prescription drugs,” said George Hill, an analyst with Leerink Swann.

Because employers may resist limiting the choice of pharmacies for their workers, the dispute could benefit some competing drug plan managers like Express Scripts and Medco Health Solutions, analysts said.

In announcing Monday that it would no longer participate in CVS Caremark drug plans, Walgreen said that its rival was essentially using its prescription coverage business to steer patients to its own CVS drugstores, discriminating against competitors.

Over time, “we went from being a valued provider within CVS Caremark’s network to, we believe, being more of a competitor to CVS drugstores within their network,” Gregory D. Wasson, the chief executive of Walgreen, said in a phone interview on Wednesday.

Certain CVS Caremark drug benefit plans have diverted long-standing customers away from Walgreen and the pharmacists with whom those customers have trusted relationships, Walgreen said. In particular, Walgreen cited Maintenance Choice, a CVS Caremark drug plan that requires people taking long-term medications to refill their prescriptions at a CVS pharmacy or through the company’s mail service — or to pay more, potentially full price, at a competing pharmacy.

CVS Caremark said on Wednesday that those plans were meant to provide more choice for workers whose employers would otherwise restrict them to mail-order services for long-term prescriptions.

The Walgreen complaints echo some of the concerns that smaller drugstores have raised about CVS Caremark, said B. Kemp Dolliver, a research analyst who follows the industry for Avondale Partners. Mr. Dolliver personally owns stock in two drug benefit competitors to CVS Caremark. The Federal Trade Commission is currently looking into some of the issues raised by the smaller pharmacies, he said, and the Walgreen dispute could draw even more attention to these potential concerns.

Independent pharmacists argue CVS Caremark has limited consumers’ choices of where to refill their prescriptions.

“When a patient does not have the right to choose the health care provider, in this case the pharmacy that they choose and trust, that’s not good,” said Joseph H. Harmison, the president of the National Community Pharmacists Association, a group representing nearly 23,000 independent community pharmacies and pharmacy chains.

Some people who feel intimidated by physicians turn to their local pharmacists for medical advice about their prescriptions, he said. “The pharmacist is often the person a patient will wait to ask the questions to,” he said.

Last May, his association filed a complaint with the Federal Trade Commission alleging that CVS Caremark had used its dominant position in the pharmaceutical service industry to eliminate consumer choice and drive consumers away from competing pharmacies.

The F.T.C. confirmed Wednesday that it was investigating CVS Caremark, but Richard A. Feinstein, the director of the agency’s bureau of competition said the commission would not comment on the subject of the probe.

Consultants and analysts say it is unclear whether the pharmacy benefit business will move toward a business model in which patients will no longer be able to fill their prescriptions at every drugstore but be forced to go to a select group of retailers.

The Art of Negotiaion

Wednesday, June 9th, 2010

CVS Caremark Announces Plan To Remove Walgreens From PBM Pharmacy Network and Transition Pharmacy Care To Participating Providers

 
 

Walgreens’ Demands Would Have Increased Pharmacy Costs For Payors and Plan Members

WOONSOCKET, R.I., June 9 /PRNewswire-FirstCall/ — CVS Caremark Corporation (NYSE: CVS) today announced that, while it has worked diligently to come to terms with Walgreens on an agreement that would allow Walgreens to continue as a member of the CVS Caremark PBM pharmacy network, it has no choice but to terminate Walgreens’ participation in its retail pharmacy networks effective 30 days from today, or as otherwise may be required by applicable law or contract requirements.  In addition, CVS Caremark will terminate Walgreens’ participation in its Medicare Part D retail pharmacy networks effective January 1, 2011.  CVS Caremark said that Walgreens’ most recent actions have violated the terms of its existing agreements and that Walgreens has failed to respond to efforts by CVS Caremark to continue business negotiations.    

(Logo:  http://photos.prnewswire.com/prnh/20090226/NE75914LOGO )

CVS Caremark has been negotiating in good faith with Walgreens over the past several months with the objective of reaching an agreement that would appropriately balance providing consumer access and managing pharmacy costs for CVS Caremark’s PBM clients and their members.  While Walgreens already receives comparable reimbursement rates to those of  other large national retail chains, including CVS/pharmacy, Walgreens has continued to seek higher reimbursement rates and announced on June 7, 2010 that it would not participate in CVS Caremark PBM networks going forward for members covered under new or renewal plans.  In order to minimize patient disruption and provide network stability, CVS Caremark’s agreements with Walgreens and other retail pharmacies do not permit network participation on a selective basis. 

Per Lofberg, President of CVS Caremark’s pharmacy benefit management business, said, “Walgreens’ announcement was nothing more than a transparent attempt to try to raise the pharmacy reimbursement rates it receives from CVS Caremark.  We’ve seen Walgreens use this approach in the past, targeting employers, health insurers, government entities and other plan sponsors.  We believe this approach is totally contrary to the needs of our clients who are all struggling to keep pharmacy health care affordable in today’s challenging environment.”  

Tom Ryan, Chairman and Chief Executive Officer of CVS Caremark, commented, “As the nation’s largest pharmacy services company, CVS Caremark is committed to being responsive to our clients needs and offering them innovative health solutions that reduce costs, improve health care outcomes and provide broad access and choice to consumers.  Our network of participating pharmacies is currently the largest ever maintained by our PBM business, with more than 64,000 participants, only 7,000 of which are Walgreens stores.”

In fact, when Walgreens is included in the CVS Caremark pharmacy network 85.9% of members on a national basis have access to a network pharmacy within a 3 mile radius of where they live.  When Walgreens is excluded from the network that number changes negligibly to 85.7%.

“We regret any inconvenience this change may have on plan members who currently fill their prescriptions at Walgreens but are confident that through our remaining valued network partners, we will continue to provide excellent geographic coverage for our clients and their members across the country,” Ryan added.  “We will continue to provide convenient and affordable pharmacy care to members, and we are committed to a smooth transition of affected members to other pharmacy providers in our networks.”     

About the Company:

CVS Caremark is the largest pharmacy health care provider in the United States. Through our integrated offerings across the entire spectrum of pharmacy care, we are uniquely positioned to provide greater access to engage plan members in behaviors that improve their health, and to lower overall health care costs for health plans, plan sponsors and their members. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics, and is a leading provider of Medicare Part D Prescription Drug Plans. As one of the country’s largest pharmacy benefits managers (PBMs), we provide access to a network of more than 64,000 pharmacies, including over 7,000 CVS/pharmacy® stores that provide unparalleled service and capabilities. Our clinical expertise includes one of the industry’s most comprehensive disease management programs. General information about CVS Caremark is available through the Company’s website at http://info.cvscaremark.com

Forward-looking statements:

This press release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company strongly recommends that you become familiar with the specific risks and uncertainties outlined under the Risk Factors section in our Annual Report on Form 10-K for the year ended December 31, 2009 and under the caption “Cautionary Statement Concerning Forward Looking Statements” in our Quarterly Report on Form 10Q for the quarter ended March 31, 2010.

Editor’s Note: Both parties are posturing for position in a public manner. We have seen this type of negotiation tactic in the past and the ending is usually within 30 days – both will issue a joint press release announcing their undying friendship for each other.

City of San Antonio Seeks Insurance Expert

Wednesday, June 9th, 2010

http://epay.sanantonio.gov/RFPListings/Content.aspx?id=935

Health Care Law Could Ban Low Cost Plans

Tuesday, June 8th, 2010

http://www.politico.com/news/stories/0610/38219.html

Walgreens Pulling Out of Caremark

Monday, June 7th, 2010

http://online.wsj.com/article/BT-CO-20100607-708132.html?mod=rss_Hot_Stocks

Hopeful Signs for Continuation of Mini-Med Plans to 2014?

Monday, June 7th, 2010

The following is an excerpt of an article written by Fred Hunt of SPBA:

Let me end with some hopeful news.  The scariest issue for all types of employee benefit plans and insurers and employer plan sponsors is no annual and no lifetime limits.  Immediately, the reg-writers asked SPBA for insights from which to start their decisions on how this legislative language emerge as something livable.  There is nothing final yet, but here is some food for thought to avoid rushing into action prematurely.

The law says that plans may have restricted annual limits until 2014, and that the regulatory agencies will define what “restricted annual limits” means.  SPBA immediately told the reg-writers that low annual limits should be allowed at least until 2014 or there will be a spike in the number of uninsured and without low annual limit plan, many workers will be left with no affordable options. Because the reg-writers in charge have many years of brainstorming with SPBA members and staff about the “real word” of employment and benefits, we are guardedly optimistic that they will recognize the logic & wisdom and not totally eliminate low annual limits right away.   Then, afterwards, common sense reality has a way of showing itself everyone can take a step back from the brink.

Monday, June 7th, 2010

Texas Supreme Court Denies Review of Stop-Loss Case

MyHealthGuide Source: StreetInsider.com, 6/2/2010, StreetInsider Article
 
AUSTIN, TX — The Texas Supreme Court has declined to review a case involving the amount some hospitals marked up workers’ compensation-related bills under rules in effect until 2008.
 
“Texas employers realized a great victory today,” Mary Barrow Nichols, general counsel and senior vice president for Texas Mutual, said. “A small number of hospitals were marking up a $4,000 item to $40,000 or more, or they’d turn a two-day admission into a $120,000 bill. These inflated charges could have cost the system hundreds of millions of dollars and continued to affect the workers’ compensation premiums of every Texas employer.”
 
The interpretation issue in this case between Texas Mutual and Vista Medical Center affects any remaining fee disputes under the stop-loss exception to the now-repealed rule.
 
Hospitals that treat workers’ compensation patients in Texas are reimbursed under the state’s workers’ compensation in-patient fee schedule. The 1997 fee schedule, which was repealed in 2008, included a stop-loss exception. Under the stop-loss exception, hospitals could be paid more than the fee schedule if they met certain criteria. The dispute between Texas Mutual and Vista centered on those criteria.
 
Texas Mutual argued that the stop-loss exception should be applied to admissions involving charges of more than $40,000 and “unusually extensive services.” Vista countered that the exception applied to all admissions for which they charged more than $40,000. The 353rd Judicial District Court of Travis County ruled for Vista. Texas Mutual appealed to the Austin Court of Appeals, which reversed the lower court. Vista then asked the Supreme Court to review the case.
 
About Texas Mutual Insurance Company
 
Austin-based Texas Mutual Insurance Company is the state’s leading provider of workers’ compensation insurance, with approximately 29% of the market. Since 1991, the company has provided a stable, competitively priced source of workers’ comp insurance for all Texas employers. Preventing workplace accidents and minimizing their consequences is a major part of Texas Mutual’s mission. Visit www.texasmutual.com.

Blue Cross Audited Financial Statement 2008, 2009 Released

Saturday, June 5th, 2010

Health Care Service Corporation has released their annual financial statement for year 2008 and 2009 – (2009 HCSC Audited Financial Statement)

A quick review suggests that  reserves increased from 38% to 51% while tax liabilities went down. Agent/broker commissions increased from 10% of premium to 13%.

If reserves increased by 34%, does that suggest a correlation to significant growth (new sales)? If agent/broker compensation increased by 30%, did that trigger additional sales? And, if HCSC esperienced increased membership, what triggered lower tax liabilities?

Editor’s Note: This post was provided by Ms. Molly Mulebriar, Jabon “Que Questa”  McPedro III, Jacob “El Matador”  Seymor (of Chicago) and Theodore “Dont Screw With Me”  Dudley

Court Upholds COBRA Benefits for Mooning Nurse

Friday, June 4th, 2010

Cobra Case

Molly Mulebriar, Investigative Reporterette, To Release Findings

Wednesday, June 2nd, 2010

Ms. Molly Mulebriar, on assignment in South Texas, has indicated that her investigative report surrounding illegal insurance activities in the Valley will be issued sooner than later. Details to follow.

Brownsville Independent School District Tables Staff Recommendation Again

Wednesday, June 2nd, 2010

Last night the Board of Trustees of the Brownsville Independent School District voted to table an action item to renew the insurance consultant contract now held by Alamo Insurance Group of San Antonio. This is the second time in as many meetings that staff’s recommendation has been put on ice.

Valley Risk Consulting of McAllen, Texas, one of the vendors competing for the contract, was again brought up by Trustee Zayas. His observation that Valley Risk Consulting’s hourly rate of $125, compared to the incumbent’s global fee, was of note.

Staff mentioned during the discussion that one of the competing vendors, Willis withdrew their bid. One wonders what precipitated that? Conflict of interest perhaps?

The BISD health insurance contract is lucrative to the tune of +$40 million. Revenue streams within the various contracts that make up the self-funded package may be significant. The Consultant of Record, whoever that may end up being, will be tasked with advising and guiding the BISD towards controlling a significant taxpayer paid budget item.

In our review of public records obtained from the BISD, we suggest that savings to the self-funded group medical plan could exceed +40% while maintaining and even improving the benefits. We hope the BISD will hire a consultant who will have the courage to guide the trustees to the right decisions. It will take political courage.

Health Care Strategies for Texas Political Subdivisions

Wednesday, June 2nd, 2010

Amgen Proposes Premium Price for Prolia

By Adam Feuerstein 06/02/10 – 07:38 AM EDT

Stock quotes in this article: AMGN  

THOUSAND OAKS, Calif. (TheStreet) — Amgen(AMGN) shares rose Wednesday after U.S. regulators approved last night the company’s injectable osteoporosis drug Prolia earlier than expected.

Prolia is widely seen as Amgen’s most important new drug and a key driver for the company’s future growth. Prolia is administered via injection twice a year and will be used initially as a treatment for osteoporosis in post-menopausal woman.The U.S. Food and Drug Administration approved Prolia almost two months before the expected approval date of July 25. European regulators approved the drug for use there last week.

Amgen hopes to later expand Prolia’s approval into more commercially lucrative cancer indications, where it can treat bone-related side effects.

Amgen shares were up 3.5% to $52.52 in Wednesday pre-market trading.

The stock’s positive reaction to the Prolia news was due both to the earlier-than-expected FDA approval but also because Amgen priced Prolia higher than expected at $825 per injection, or $1,650 per year.

“We view this positively as it appears that Amgen was pricing Prolia with the oncology indications in mind,” wrote Citi analyst Yaron Werber in a Wednesday morning research note to clients. “Using this price, the annual cost for the cancer indications (once monthly at double the dose) translates to $19,800 vs. our projection of $12,240.” Werber rates Amgen a buy with a $64 price target.

Tuesday night’s approval of Prolia for osteoporosis does come with some strings attached. The drug is approved only for post-menopausal women at high risk for bone fracture and the FDA is requiring Amgen to conduct long-term safety monitoring of the drug and implement a risk-management plan to communicate the drug’s risk and side effects to patients and doctors.

Prolia’s twice-yearly injections will compete against pills for osteoporosis that are taken weekly or monthly.

The FDA is currently reviewing Prolia for use in various cancer indications, where the drug will be used to stop bone loss related to cancer and cancer treatments. Amgen is awaiting results later this year from a large, phase III study to determine if Prolia can stop the spread of prostate cancer to a patient’s bones.

Mini Med Plans To Undergo Major Changes With Healthcare Reform

Tuesday, June 1st, 2010

Agents and brokers marketing limited medical plans, which will undergo “major changes” with the new health care reform law, should be looking ahead at how those changes will affect their clients, according to an industry expert.

John Conkling “Major changes to the limited medical industry are coming this fall and right now is the calm before the storm,” said John Conkling, vice president of national accounts for Fringe Benefit Group, an Austin, Texas-based firm, in a statement.

 Brokers who market limited medical plans – or have customers utilizing limited medical plans – should contact their carriers immediately to find out their product strategy as a result of health care reform, Conkling said.

 “They should ask ‘How will health care reform affect renewals? Are you still accepting new business?’ If the carrier can’t give you straight answers, find a new limited medical partner who can,” he said.

 Among the changes will be that coinsurance-based expenses incurred by limited medical plans will be subject to new rules, Conkling said.

 Employers using limited medical plans, also known as limited benefit plans or mini-meds, will experience changes starting Sept. 24, when grandfathered health insurance plans begin to renew. Group health plans, even those that have been grandfathered, will have to meet new requirements, including no lifetime and annual limits.

 All limited medical plans that were considered “group health insurance plans,” plans that issued Letters of Creditable Coverage under HIPAA, and plans identified as Limited Major Medical Plans that function similarly to traditional group plans with co-pays, deductibles, co-insurance and an annual overall maximum or a separate inpatient/outpatient maximum will be subject to these new regulations starting Sept. 23, Conkling said.

 Within the limited medical industry, there are two styles of limited medical benefit plans: coinsurance (sometimes referred to as co-pay based or expense incurred) and indemnity-based (sometimes called fixed indemnity) insurance.

 Fixed indemnity style limited medical plans that do not issue creditable coverage letters or represent themselves as a “true group health insurance plan” are exempt from the new regulations because they are filed as supplemental and not subject to these new regulations, as opposed to the coinsurance-based limited medical plans, which are, according to Conkling.

 He added that employer groups renewing after Sept. 23 may find their carrier will not renew the plan because it cannot meet the new rules. They also may experience significant rate increases or have to move to a fixed indemnity-style limited medical plan.

Tuesday, June 1st, 2010

Blue Cross and Blue Shield

Featured Health Business Daily Story March 2, 2010

 Michigan Blues Plan Is Sued by Municipalities Over Alleged ‘Hidden’ Network Access Fees 

Reprinted from The AIS Report on Blue Cross and Blue Shield Plans*, a hard-hitting independent monthly newsletter on business strategies, products and markets, mergers and alliances, and financing of BC/BS plans.

*Not affiliated with the Blue Cross and Blue Shield Association or its member companies.

By Liana Heitin, Editor (lheitin@aispub.com)

Blue Cross Blue Shield of Michigan is facing lawsuits from nearly a dozen self-funded municipal organizations and public entities around the state who claim the health plan made millions off of hidden provider network access fees. And while the company’s transparency — not the legitimacy of charging such fees — is the conduct in question, one benefits consultant says self-funded groups should expect to pay access fees for the Michigan Blues plan’s superior network discounts. Still, the Blues plan is less forthright than competitors such as Aetna Inc. and CIGNA Corp. in disclosing those fees, he says. The consultant also warns that other self-funded groups may have similar legal claims against the Michigan Blues plan.

 The Oakland County Road Commission, the first organization to file suit over the disputed contract language, reached a settlement with the Michigan Blues plan last fall. BCBSM agreed to pay the county $650,000 and waive administrative fees for three years, according to The Detroit News, which obtained the information through a Freedom of Information Act request. Michigan Blues spokesperson Helen Stojic would not discuss the specifics of the settlement, but said only that the “Oakland County [lawsuit] was some time ago. We arrived at a mutually acceptable long-term business arrangement in lieu of continued court proceedings.”

 That settlement acted as a catalyst, according to the plaintiffs’ attorneys, William Horton and Liza Favaro with Troy, Mich.-based law firm Giarmarco, Mullins & Horton, P.C., for other organizations to revisit the language in their contracts and file suits of their own. Two other communities have settled since then and 11 more are pending, the attorneys say.

 Horton and Favaro are also forming a proposed class-action suit, involving the Genesee County Road Commission, the city of Saginaw, and Tuscola and Cass counties. They filed the complaint in August 2009 and are waiting for a judge to certify the case. Favaro tells The AIS Report that the suit could include “roughly 200 potential class members from across the state.”

 The plaintiffs allege that prior to 1994, the Michigan Blues plan itemized all administrative fees, including the access fees now in question. However, the plan began receiving complaints from self-funded clients, who argued that the access fees should only apply to fully insured plans.

 The attorneys point to an internal memo circulated among BCBSM executives in late 1993 entitled “Retention Reallocation Executive Summary.” The memo states: “Citing BCBSM’s high costs, many customers have complained and have threatened to leave if relief was not provided.…Reflecting certain BCBSM business costs in hospital claim costs will provide long-term relief to the problems [related to billing]…and will also satisfy short-term objectives of enhancing customer relationships while cutting operational costs.” And in the line that the attorneys have relied on in painting the practices as disingenuous, it says: “Changes to these costs will be inherent in the system and no longer visible to the customer.”

 A few months later, the insurer rolled out the new pricing arrangement in which the access fees were tacked onto claims rather than disclosed on the rider. For instance, under this arrangement, the client would receive a statement for a $100 hospital claim. However, the claim would not explain that the Michigan Blues plan had received a discount and only paid the hospital $85. The extra $15 went to the health plan as an administrative cost. Favaro says, “the value of Blue Cross is that it has special arrangements with specific hospitals that enable it to get discounts with hospital claims. But they weren’t passing those savings on.” She says that the fees were as high as 15% by 2002 — and in Oakland County, they totaled $17 million over 14 years.

 Stojic contends that “when contracts were renewed annually, the contract renewal documents reminded customers that part of their obligation included payment of these fees.” She also emphasizes that the fees “enable these groups to realize substantial savings through the Blue Cross hospital network.”

 Access Fees Are High but Legitimate

 A Michigan employee benefits consultant, who has worked with BCBSM for many years and requests anonymity, says that the legitimacy of the expense should not be in question. “It’s an access fee — it’s the cost of the access to a developed network where Blues has spent a considerable amount of time, energy and money in negotiating favorable rates of reimbursement. There’s a cost to doing that.”

 He explains that the Michigan Blues plan’s access fees likely were higher than those of other health plans, which could have scared off potential clients who were only comparing fixed costs. Potential self-funded clients might not recognize that the Michigan Blues plan makes up for this with lower medical claims, he says. “When you look at the effective discount relative to the next largest PPO in the state, Blue Cross still commands a compelling pricing advantage,” the consultant says. “While the overhead burden is higher, it’s completely offset by its effectiveness in negotiating with particular providers. There’s no question that’s the case — it’s been proven through claim repricing, actuarial studies, over and over.”

 However, he asserts, the cost savings don’t excuse the health plan for not disclosing its fees. The principal issue is transparency, and BCBSM “clearly made a conscious decision to bury the fees.” The Michigan Blues plan is less forthright than its commercial competitors, such as Aetna Inc. and CIGNA Corp., according to the consultant.

 Plaintiffs Say ‘Language Is Meaningless’

 According to the complaint issued on behalf of Livingston County, one of the communities whose case is pending, the following language appeared in the Schedule A (a yearly rider to the master contract) until 2006: “Your hospital claims cost reflects certain charges for provider network access, contingency, and other subsidies as appropriate.” The charges referred to were not listed in the quarterly reports, the complaint states. BCBSM changed the language in the 2006-2007 contract, adding a reference to an “ASC Access Fee,” which was not described in the master contract. An Oakland County employee was the first to notice the language change in 2006, says Favaro, and begin questioning the fees.

 “At this point, we’ve had judges in seven cases say that language is ambiguous,” says Favaro, referring to those judges who have ruled against BCBSM’s motions to dismiss the lawsuits. “We don’t believe it discloses anything.…The language is meaningless,” she says. “Our response is, ‘If you really wanted to disclose it, there were so many other ways you could have done so.’”

 The agents who sold the plans should be held accountable as well, says the benefits consultant. “In some instances, the agents who failed to do their work have collected massive commissions and gotten off scot-free,” he says. “They didn’t do their jobs, they didn’t evaluate, didn’t analyze and disclose the flow of dollars. And in some cases, those were pretty big dollars.” He says the agents should have known to request a retention reallocation report, now known as an additional administrative compensation report, which details the plan’s overhead costs.

 The consultant speculates that these claims could apply to any self-insured group, but for now only municipal and public entities have gotten involved, in part because they are in contact with one another. Favaro says that she and Horton, who are involved in all cases, did not actively solicit clients but that the other entities came to them after the Oakland settlement.

 According to Stojic, BCBSM does “not believe these cases will be successful because they have no merit. The disputed fees were specifically referenced in each of these group customers’ BCBSM contracts.” She also notes that all groups have continued to do business with the Michigan Blues plan.

 Favaro says she estimates the next case is likely to go to trial this summer.