Risk Managers

NEW YORK, Feb 18, 2011 (A. M. Best via COMTEX) —

The health care reform law will result in consolidation among smaller brokers, said J. Patrick Gallagher Jr., chairman, president and chief executive officer of insurance broker and risk management services firm Arthur J. Gallagher & Co.

“I think it’s [the new health care law] just horrible for America, but it’s great for Gallagher,” the executive told the audience at the Bank of America Merrill Lynch Insurance Conference in New York, according to a replay of the conference on the company’s website.

“Clients cannot figure this thing out,” Gallagher said, adding his company has built tools to assist clients in determining their costs as the health-reform changes are implemented in the years ahead.

“What this is going to do, in my opinion, is essentially push all the smaller brokers that are in the benefits space out of the space,” Gallagher said, noting that will help his company’s acquisition opportunities.

Gallagher said his company’s “pipeline for acquisitions has never been better,” and estimated there are some 18,000 retail and wholesale brokerages and agencies in the United States.

Recently, the company acquired the Gleason Agency Inc. and its affiliate, Gleason Financial Ltd., both headquartered in Johnstown, Pa. (BestWire, Jan. 11, 2011). Gallagher has long employed a strategy of growing through acquisitions, completing 71 deals, with annualized revenue of $409 million, from 2008 through 2010, according to the company’s presentation at the conference.

Gallagher highlighted the company’s acquisition of GAB Robins (BestWire, Oct. 5, 2010), which he said is going well. Gallagher is intent on international expansion and focusing on building new niches, he noted.

As of Dec. 31, Gallagher had $100 million in available cash.

“We only do three things with our cash: We buy brokers, we pay dividends, and, if there’s excess cash after that, we repurchase shares,” Gallagher said. “And, at this point in time, the share repurchase is not probably where we’re going because we have such great acquisition opportunities.”

Brokers are facing a moment of truth due to the new medical loss ratio rules, Peter Gruenberg, chief placement officer with the human capital practice of Willis North America, recently said. By 2012, large group health plans will be required to issue refunds to policyholders if they spend less than 85% of premium income on medical care and activities to improve the quality of care; for small group and individual plans, the threshold is 80% (BestWire, Jan. 5, 2011).

Founded in 1927, Arthur J. Gallagher & Co. was the fifth-largest global insurance broker, based on 2009 revenue of $1.7 billion, according to Best’s Review magazine’s annual ranking.

During the afternoon of Feb. 18, Gallagher’s stock (NYSE: AJG | PowerRating) was trading at $31.62 a share, up 0.67% from the previous close.

(By Diana Rosenberg, senior associate editor, BestWeek)

Editor’s Note: Big is not always better. The big brokerage houses employ people. Some people are better equiped than other people. But a small independent can have the brain power and aggressive energy to run circles around the big boys. And they are more nimble.

Self funded employer groups sometimes find themselves held hostage by their TPA via stop loss insurance policies. The intended result is that the employer is unable to find competitive alternatives.  Fear of lost coverage drives the buying decision to the advantage of the incumbent TPA. We have seen this more than once, more so with certain TPA’s operating in Texas.

For example, we assisted a Texas county in evaluating their  self-funded health plan recently. The county had been with the current TPA for many years and had not competitively bid out their cover for some time. Data provided by the TPA was less than good, and pulling data from the TPA was tantamount to asking the Pope for a condom.

The TPA provided the stop loss carrier’s renewal on the TPA’s letterhead, with no supporting documentation. When asked to provide the underwriter’s notes, the TPA refused, stating that they (the TPA) were the underwriters and only they could bind coverage. “This is how we do business” was their response.

We knew this was not true.

Their stop loss “renewal” offer was firm, with no conditions or contingencies despite the TPA’s representations that the case was running “hot” and there were nine (9) potential large claimants. The TPA warned the county that going to bid would jeopardize the stop loss carrier’s renewal with the possible  loss of a firm renewal and potential lasers to be placed on the identified potential large claimants.

“The county is really getting a good deal, just don’t jeopardize it” warned the TPA’s broker.

The TPA gravely warned that any other competing TPA/Stop Loss carrier would most certainly laser some individuals to the detrement of the county. The TPA and the local agent representing them met with each county commissioner individually to warn and caution them. They even provide each a formal letter attesting to their representations.

The TPA provided a claim report indicating the identification of potential large claimants as proof. Certainly this “evidence” was not doctored, or was it? 

Why would the stop loss carrier offer a firm renewal, with no lasers, with very low and fair rates if the case was running “hot?” You would think, and common sense would dictate, that the carrier would rather lose the account than to keep it. After all, aren’t insurance companies in the business to make a profit? Does the Pope abhor condom usage? Is the Moon round?

We were suspicious. When told we could not contract the carrier’s underwriter to discuss the renewal, and to verify it, we picked up the phone and called the stop loss insurance company directly. This company is a well known household name carrier with a fine reputation. We knew some of their underwriters. There was no indication other than our innate suspicions that our call to them would produce information contrary to the representations of the TPA.  Trust but verify should be everyone’s business model. 

Our conversation with the chief underwriter was eye opening. No, there were no indicated large claimants. No one was in large case management. No one in the group attained 50% of the specific level. The renewal called for a modest trend increase and no lasers. Run-in claims had no limit. A great renewal for a good risk it seemed. And, they were willing to negotiate an even better renewal too. (Hmmmmm, lower premium = less commissions?)

Here is a case where an employer was advised by the incumbent vendor  not to bid out their cover as it would jeopardize their covered risk. Documentation was provided to convince the employer that it would be in the best interests for all to maintain the status quo. However, it became apparent that the intent was to hold the county hostage and retain the account for another contract year.

Using documentation provided directly by the stop loss carrier, the county successfully bid out their self funded plan. A change in stop loss carriers provided savings to the plan. The TPA was fired and a new one retained.

Editor’s Note: Unfortunately, this story is not too uncommon. The severity of this one is. Has your group ever been held hostage?

Obama National Forest in Figmentville, Arkansas

Individuals: Subsidies for buying health insurance for individuals will be available for those making between $14,000 and $43,000 (rounded). For two parents and two kids, the relevant household income must be between $30,000 and $88,000.  If nearly $90,000 seems like a rather hefty income to merit federal subsidy (free stuff from big government), this eye-opening sum will grow even more shocking as it rises with inflation.

Medicaid: As of 2014 all state Medicaid programs will be required to cover most people who earn up to 133% of the federal poverty level. Individuals who earn less than $14,000 will qualify, and a family earning $29,000 or less would get free health care too. It is estimated Texas Medicaid roles will increase 73%. 

A total of 84,000,000 Americans are expected to be enrolled in Free Health Care, i.e, Medicaid by 2014. 

Employers: As of 2014, employers with fifty or more full time employees will face the possibility of a  punishment fine if they dont provide health insurance. Moreover, if their employees enroll on their own in a qualified insurance plan and are eligible for a subsidy (See Individuals Above), then the employer if fined $167 per employee per month for each employee. Bizarrely, it does not matter how many employees receive federal assistance, the punishment is applied against the employer for every full time employee after the first thirty; so an employer of fifty (50) employees could be hit with a $40,000 punishment tax. 

Companies with more than fifty employees who do offer health insurance can still be punished if one or more of their employees chooses to enroll in a federally subsidized plan (See Individuals Above). Punishment tax can be as high as $250 per month for each employee receiving a federal premium credit. If an employer wants to hire a $24,000 receptionist, for example, the health insurance policy now makes the receptionist 63% more expensive.

Editor’s Note: Source – “The Truth About ObamaCare”, Sally C. Pipes.

The Board of Directors of the South Texas Health Coop (STHC), a risk pool established in 1998 to provide Texas educators with comprehensive health care benefits, have moved to  adopt a cost plus model for reimbursing medical care facilities effective March 1, 2011. Estimated cost savings, based on historical claim data, is expected to be significant.

Cost savings to the plan will be utilized to implement benefit improvements in the near term.

The STHC has maintained comprehensive health care benefits since 1998 with minimal cost increases due to unique riskmanagement techniques employed by out-of-the-box strategies. 

The STHC recognized in 1998 that health care providers, in partnership with PPO networks, negotiated pricing that in many cases were not market driven. The STHC began to directly contract with interested physicians and facility managers early on, with the intended effect of lowering health care costs for their members.

Rio Hondo Independent School District and the La Feria Independent School District are members of the STHC. Their participation in a cost plus reimbursement approach augments several other large employer groups in the Lower Rio Grande Valley to contain health care costs.

Medicare is experimenting with the cost plus reimbursement model with selected rural hospitals. The Medicare model is cost plus 1%. (http://blog.riskmanagers.us/?p=3895)

Amfels, (http://blog.riskmanagers.us/?p=5074)  the second largest employer in Brownsville, Texas, will begin to pay health care facilities on a cost plus approach March 1, 2011. Tropical Texas MHMR with over 500 employees headquartered in Brownsville changed their health plan to a cost plus approach last year, with significant savings reported to date.

The cost plus model employs published data hospitals and health care facilities submit to the Federal Government attesting to their costs. Using this data, each claim is audited line by line. Each line item charge is converted to the hospital’s cost basis as reported to CMS, and a 12%  profit margin is added to the charge.

Utilizing the cost plus 12% margin approach, savings over typical PPO contracts are significant. For example, a recent hospital bill of $425,000 in billed charges was repriced through a national PPO rental network down to $250,000. After auditing the bill, cost plus 12% reimbursement brought the claim down to $115,000.

Balance billing issues are assigned to an outsourced fiduciary of the plan and the patient, i.e. the insured, is held harmless.

Editor’s Note: When we asked Molly Mulebriar , ace health care expert, why more employers dont implement the cost plus approach, her response was “because they have no cajones.”

Analysis Shows Hospitals Can Double Revenue From Their Own Employee Health Plans

“The study finds that hospitals employing this “direct contracting” model for their own employee health plans average about $2,500 in revenue per employee per year, compared to about $1,250 for those who employ the “outsourced PPO” model.”

SOURCE: CoreSource

In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.

The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement — which lets them off the hook for their collapsing retirement scheme.  And, of course, the Obama administration is eager to accommodate their buddies.

Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report. 

In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations. (pdf)

House Republican Leader John Boehner (Ohio) and a group of House Republicans are mounting an effort to fight back. 

The American people have become painfully aware over the past year that elections sometimes have calamitous consequences.  Republicans lack the votes (for now) to reign in the Obama administration’s myriad nationalization plans for everything from health care to the automobile industry.

Now the backdoor bulls-eye is on your 401(k) plan and the trillions of dollars the government would control through seizure, regulation and federal disbursement of mandatory retirement accounts.

Boehner and the group are sounding the alarm, warning bureaucrats to keep their hands off of America’s private retirement plans. 

Just when you thought it was safe to come up for air after the government takeover of health care.

Partnership Valley Baptist and Vanguard Feb 16 2011                    http://www.vanguardhealth.com/

Molly Mulebriar, ace reporterette and forensic  bulldog, reports that touted BCBS PPO discounts may not be all that they seem to be. “It could be a mirage” Mulebriar stated, “or deceptive trade practice, or neither.”

Mulebriar, in her continued quest for the truth, recently learned of a January 2011 hospital admission of a renouned celebrity from South Texas. Apparently, the patient was in need of emergency treatment, and sought help at Hermann Memorial in Houston. The condition warranted an overnight stay in the intensive care unit. The patient was insured by BCBSTX.

BCBSTX lists Hermann Memorial Hospital as an in-network hospital.  Under PPO contracts, in-network providers agree to discount their fees for service. At least that is the theory.

But in this case, there was no discount at all. One could assume that BCBSTX brokered an agreement with Hermann Memorial that allows BCBS to list this hospital as an in-network provider, and nothing else.  A good marketing ploy to be sure, but not so good to the financial health of the patient it seems.

Mulebriar has learned that officials within the Hermann Memorial system told the patient that there was no BCBS discount available on this particular claim. Officials spent 38 minutes on the phone with BCBS representatives to inquire, confirm that no discounts were available. Yet, when Mulebriar called the BCBS service office to inquire if Hermann Memorial was in-network, she was told “Yes, and of course we have negotiated steep discounts with the hospital.”

As evidence, Mulebriar offers the following documents :  Memorial Hermann Northwest

Mulebriar writes “What is amazing is the hype surrounding PPO discounts and the savings that are to the benefit of the consumer. This patient purchased a product with an inherent promise that health care costs would be negotiated and discounted. The patient sought treatment at a directed facility based on representations made regarding costs, only to find that no discounts were negotiated at all. This is sad.”

By JASON ROBERSON

Staff Writer

Published 08 February 2011 08:48 PM

More on this story

Texas Health Resources and a group of cardiologists announced Tuesday that they had entered a joint venture to open a dedicated heart hospital in Arlington.

The partnership is an example of not-for-profit hospital companies forming for-profit ventures with physicians.

Texas Health Resources, which receives a tax exemption as a not-for-profit company, has a majority ownership in the venture. Financial details were not disclosed.

“Any profits received by Texas Health go toward its nonprofit mission,” said Megan Brooks, spokeswoman for Texas Health.

The health care law signed in March places a moratorium on new physician-owned hospitals, such as the Texas Health Heart & Vascular Hospital Arlington. It also restricts expanding existing facilities.

Proponents of the ban say physicians, who have some control over patient admissions, could direct patients to their own hospital or boost revenue with unnecessary care.

The law placed a Dec. 31, 2010, deadline on new physician-owned hospitals. Texas Health’s heart hospital opened in November in a refurbished building on the campus of Texas Health Arlington Memorial Hospital.

“We worked hard to meet the deadline,” Brooks said.

In addition to extra revenue, Texas Health may benefit from improved quality scores that soon may be tied to reimbursement rates.

The U.S. Centers for Medicare and Medicaid Services now measures readmission rates of heart failure patients. Having a dedicated heart hospital next to a general acute-care hospital can be beneficial.

Take Baylor Health Care System’s arrangement in Dallas, for example. Its Baylor Heart and Vascular hospital is located on the campus of Baylor University Medical Center Dallas.

When patients come in with heart problems, Baylor sends the sicker patients to Baylor Medical Center Dallas. Those with more typical heart failure go to the specialty heart hospital.

This setup has helped Baylor’s heart hospital lead the nation with the lowest readmission rate for heart patients.

Patients who visit the emergency room of Texas Health Arlington hospital with heart problems will be transferred to the heart hospital for specialized care.

Kirk King, president of Texas Health Arlington hospital, called the venture a “visionary partnership” that will make it the “hospital system of choice for heart and vascular care in North Texas.”

A large South Texas school district is in a quandry. Confusion reigns. The courts are involved. Everyone has an opinion, and none are compatible.

PPO “A” had the case first. An independent out-of-state auditing firm was hired (Audit Firm #1) to audit claims and determined that the overall provider PPO discount was 41%.

PPO “B” subsequently gained the account. Another out-of-state independent auditing firm (Audit Firm #2) was retained to audit the claims and determined that the overall provider PPO discount was 37%, a “loss” to the district.

PPO “A” regained the account. After the first year a report was generated by the TPA showing that the overall provider PPO discount was almost 59%. This represents a gain in discounts from when PPO “A” first had the account of +18%.

Local newspapers printed the story. Readers were mislead. In actuality, this district’s claims over a three year period went up over 56% despite increasing “discounts.”

In a three year period, PPO “A” increased their PPO discounts from 41% to almost 59%, a gain of 18%. Yet the district’s health costs increased.

Did PPO providers agree to reduce their fees by 18%?  If so, then they gave up almost $13,000,000 in annual fees for this school district. (Audit company #2 estimated that for each 1% PPO discount = $700,000 in savings).

In reviewing information gained from the Texas Open Records Act, a contending PPO guaranteed a minimum of an overall PPO discount of 62% and even put their administration fees at risk should the benchmark of 62% not be reached.  They even included out-of-network claims in their guarantee offer. Yet, this carrier was not successful in gaining the account. Using the formula provided by Audit Company #2, this contract would have saved the district over $ 17,000,000 over PPO “B”‘s contract less than two years before.

So here is a summary: PPO “A” had the account first, and saved the district on average 41% in claims. PPO “B” gained the account and saved the district an average of 37% in claims. PPO “A” regains the account and now has an overall PPO discount of almost 59%, up from 41%, for a gain in savings to the district of +18%. Yet a contending PPO network guaranteed their discounts to be 62% or better, and did not gain the business although it was supposed that the savings to the district would exceed $17,000,000.

Kind of confusing, isn’t it?

Editor’s Note: Fuzzy math reigns supreme in South Texas these days. Forget the discounts – they mean nothing.

             Allscripts CEO Glen Tullman: An argument for Wikileaks in US healthcare

In 2008, Allscripts CEO Glen Tullman told Alex Nussbaurm of Bloomberg.com that physicians should take out loans to invest in his EHR product “to ensure that doctors have some skin in the game.” What did you expect? How much charm does it take to sell federally subsidized products when everyone knows that they’re mandated anyway?

Yesterday, Nicole Lewis posted “Health IT’s Future Without David Blumenthal” – a glowing and arguably deserved tribute to Dr. David Blumenthal who is leaving the ONC

http://www.informationweek.com/news/healthcare/leadership/showArticle.jhtml;jsessionid=0OLOEMENGCENJQE1GHRSKH4ATMY32JVN?articleID=229201216&pgno=1&queryText=&isPrev=

From where I’m sitting, it’s clear that Tullman used Lewis and InformationWeek to score more points with Washington and Wall Street, while continuing to marginalize the interests of those who actually take out loans to purchase his product: “David shepherded ONC through a very critical time . . . the creation, definition, and implementation of meaningful use, which really is a way to ensure that physicians actually use electronic records to improve care, but also that taxpayers get good value for their investment.” What about the doctor’s investment and more importantly, if a doctor is busy clicking on links to qualify for meaningful use dollars, who is accountable to the patients?

I don’t know about you, but it’s not difficult for me to recognize that like other HIT stakeholders whose careers are propped up by easy mandates rather than finicky satisfied customers, Tullman indeed has solid free-market reasons to play to investors and politicians while fearing his customers. They’re pissed at the man.

HCPlexus recently partnered with Thompson Reuters to conduct a nationwide survey of almost 3,000 physicians concerning their opinions of the quality of health care in the near future considering the Patient Protection and Affordable Care Act (PPACA), Electronic Medical Records, and their effects on physicians and their patients. (See “5-page Executive Summary”)

http://www.hcplexus.com/PDFs/Summary—2011-Thomson-Reuters-HCPlexus-National-P

“Sixty-five percent of respondents believe that the quality of health care in the country will deteriorate in the near term. Many cited political reasons, anger directed at insurance companies, and critiques of the reform act – some articulating the strong feelings they have regarding the negative effects they expect from the PPACA.”

At this crucial time when Republicans are already threatening to cut off remaining HITECH funding, whose job will it be to break the news to HHS Secretary Kathleen Sebelius that the EHR savings she was counting on to fund a major portion of healthcare reform are only as valuable as CEO Tullman’s politically-correct fantasy? Pop! From what Nicole Lewis writes, my bet is that the Secretary won’t take the news well: “[Sebelius] reiterated that the successful adoption and use of HIT is fundamental to virtually every other important goal in the reform of the nation’s health care system.” Such pressure from the top down will make it even more difficult for HIT stakeholders, including insurers and politicians, to disown the most egregious. crowd-pleasin’, bi-partisan blunder in medical history since blood-letting was declared Best Practice by popular demand.

According to the HCPlexus-Reuters survey results, one in four physicians think EHRs will actually cause more harm than help in spite of Dr. Blumenthal’s best efforts. I wonder if the escalating bad press about EHRs helped Blumenthal decide to return to his academic position at Harvard. Of course, the controversy over HITECH is nothing new. There have been signs for years that EHRs, including Allscripts products, will neither improve care nor provide taxpayers (our grandchildren) a good value for their investment.

If Tullman was unaware of the highly critical HCPlexus-Reuters study when he assured InformationWeek that his subsidized product has value in the marketplace, he must have been aware of the disappointing news concerning two other recent studies performed by Public Library of Sciences (PLoS) and Stanford which also confirm that EHRs do not improve care. So imagine what it’s like to be one of Tullman’s new, naïve and trusting customers who are expected to use the product for something it’s not designed to do.

It’s my opinion that Tullman’s apparently incorrigible business ethics have no place in the land of the free, and that more transparency in healthcare would help protect the nation from such politically-connected tyrants. Tullman, a long-time Chicago friend of Barack Obama and a Wall Street sweetheart, would still be just another domesticated CEO if it weren’t for the bi-partisan mandate for electronic health records that help Allscripts, Obama and Wall Street more than clueless patients.

If you want to seriously cut costs in US healthcare as well as cut our grandchildren’s taxes, demand transparency from not just the doctors and patients, but from stakeholders as well. Protected communications between good ol’ boys in healthcare are hardly diplomatic cables about military secrets and ALWAYS increase the cost of healthcare.

So when do you want to get the website started? I’m here to serve wherever you need me.

D. Kellus Pruitt – pruittdarrell@sbcglobal.net

           A large Texas public school district attempts to determine which PPO network has the best “discounts” for their multi-million dollar self-funded health plan. Two independent auditing firms are hired for that purpose, over a period of three years.

Audit firm #1 represents that PPO “A” exhibited an average overall PPO discounts of 41%. Audit firm #2 confirms this figure. Audit firm #2 represents that PPO “B” exhibited an average overall discount of 37%, or less than what PPO “A” can deliver. A significant differential of 4%.

Yet, neither of the three local hospitals will confirm or deny these representations.

Suppose than an independent study reveals that neither PPO “A” or “B” have a market dominance over the other. And, a careful review of actual hospital specific PPO contracts between both networks reveals little or no difference in overall discounts. For all intents and purposes, the “discounts” are the same.

But the difference is how the “discounts” are accounted for. Are all of the discounts passed on to the consumer? The answer many have found is elusive.

Take a $100,000 billed charge for a hospital stay. PPO “A” and PPO “B” both negotiate a 41% discount. But PPO “B” negotiates a “provider re-pricing fee” which they acquire from the discount. Here is how that works:

PPO “A” – $100,000 billed charge less $41,000 = $59,000 paid to hospital by self-funded plan

PPO “B” – $100,000 billed charge less $37,000 = $63,000 paid to hospital by self-funded plan. Hospital pays PPO “B” $4,000 re-pricing fee, bringing the hospital’s net reimbursement down to $59,000.

Net result is that both PPO “A” and “B” pay the hospital the same, or $59,000. So the “discount” is exactly the same.

The $4,000 difference is an administrative expense hidden in the claim side of the ledger.

Editor’s Note: Many insurance consultants evaluate PPO networks without looking at and comparing actual provider specific PPO contracts. You cannot evaluate PPO contracts without seeing them. A claim re-pricing exercise is useless. We know of one consultant who asked competing PPO’s to reprice 13 sample hospital claims on a 7,000+ member school district – he did not review provider specific contracts and the hospitals involved would not confirm or deny the consultant’s work product.

On-site medical clinics are not new. The concept is simple: employees can seek cost effective primary care services at their place of work, saving time and money.

A review of this power point presentation  – PSJA_Annual_Review_2008-2009 – of the PSJA Independent School District’s on-site medical clinic shows that the all inclusive costs of operating the clinic approximates $14.45 per employee per month.

PSJA ISD is a large south Texas school district with over 5,500 employees.

Other similar size districts in South Texas do not have on-site medical clinics due primarily, we believe, to local politics. It may be that area physicians worry about lost revenue and kickbacks from referrals. Hospitals, whose bread and butter are lucrative referrals from willing physicians with admitting privilages have a vested interest in controlling the politics surrounding on-site medical clinics for political subdivisions.

Hospitals claim they can run and operate on-site clinics cheaper than anyone else. They charge much less than independent operators but make up for the low ball rates by referrals to their own facilities.

The PSJA ISD clinic cost is one of the lowest we have seen in the industry. We have seen PEPM rates as high as $65.

Based on the information on the powerpoint the average office visit encounter was $52.68 which correlates to Medicare – 30%. Prescription drugs averaged $45.56 per encounter.

http://insurance-and-benefits.psja.schoolfusion.us/modules/locker/files/get_group_file.phtml?fid=6841292&gid=428313&sessionid=4d55bf318ae7408a1f05998b65b35066

What is not shown on the power point presentation is savings realized through selective referrals if any. If this is structured properly, the savings to the PSJA self-funded plan on the referral side would far surpass the actual savings on primary care services.

Editor’s Note: If PSJA would restructure their PPO plan to an EPO with direct contracts procured through a competitive bid process, they could reduce their overall medical spend by +40%. However, that would be a giant political step indeed.

From Molly Mulebriar – “What a novel idea! Getting local health care providers to compete for the business rather than insurance companies.”

                             By Joe Paduda

We know that much of the opposition to the Accountable Care Act is feeling pretty good right now, as they should after the Florida judge’s rejection of the Act.

What we don’t know is what will happen if they are successful in overturning health reform.

What will our country’s health system look like in five years if there isn’t reform?

Impact on insurers
Without reform of the insurance underwriting and rating laws, insurers will seek to be even more selective about the policies they write – their right, and I’d argue an obligation on the part of the for-profit health plans. As stock companies, their first obligation is to their owners – and that obligation requires them to generate profits and growth. That is not a value judgment – it is a statement of fact.

Health plans just don’t want the ‘risk’ that someone will have a claim. I’d expect healthplans will also continue to ‘churn’ their books – to try to dump policies that have been in place for more than three years, as that is about when claims start to pile up.

The number of viable healthplans will continue to shrink. As a mature industry, the healthplan business has been steadily consolidating – if anything that will accelerate. And no, the free market will not increase ‘choice’; we already have a free market for commercial plans (and Medicare Advantage and Part D) and in most areas there are at most two plans to choose from.

Smaller healthplans will find it increasingly hard to compete, as the big plans get ever-better discounts from providers, who have to make up the lost revenue by cost-shifting to the smaller plans with less clout. As their costs go up, so will their rates, until they either wither away or get bought out by the big plans.

PPO plans will get ‘nichier and nichier’. Their higher medical costs will push members towards HMO-type plans, making it harder for employers with widely-spread workers to get affordable coverage unless they buy insurance from one of the big plans that operates in all the areas the employer has bodies. Inevitably, some workers will be left with poor coverage…

Impact on individuals and families
Bureaucrats at insurance companies will still be making decisions about what doctors you can see and how much they’ll pay and what they’ll cover and what they won’t. You’ll have to ask permission for services, and hope and pray they get paid. Those same bureaucrats will tell you they’re interested in keeping you healthy, but that’s only till they can churn you out of their book.

There will continue to be a hodgepodge of state-specific insurance mandates, rules, regulations, and enforcement mechanisms, as well as benefit designs and limitations

But the big problem is this – it will get harder and harder for individuals and employers to get insurance coverage.

Here’s one all-too-common scenario. The breadwinner loses her/his job, and with it health insurance coverage. They find a new job, but that company doesn’t offer benefits as they are too expensive. So, Ms/Mr Breadwinner, responsible person that s/he is, tries to buy an individual policy. There are several insurers that write those policies, so the applications go in – followed by requests for medical records, documents, and attestations signed by their physicians. Oops, one of the family has a mild case of asthma, and dad takes cholesterol medication, and mom saw a counselor a few years ago after her dad died.

Three insurers decline to offer a proposal, and the one that does will exclude any cardiovascular coverage for dad, any pulmonary issues for junior, and mom won’t be covered for any psychiatric or anxiety or related issues. And, oh, the policy is 50% more expensive than the original quote. Leaving Mr/Ms Breadwinner to decide if they want to come up with $22,000 a year for less-than-full coverage and their HSA deductible (in 2009 dollars)…

Unfortunately there isn’t any governmental assistance, so the Breadwinners, who make $75k a year, are looking at spending almost a third of their gross income on health insurance – insurance that doesn’t cover their most likely health problems.

Think this is hyperbole? You’re wrong. This is happening every day in every community, and if health reform is overturned, it is going to happen more and more often.

What does this mean for you?

Here’s hoping those seeking to overturn reform have a solution in mind that will actually work. And when you consider their ‘solutions’, remember that no insurer will cover your pre-existing condition unless they are forced to. Or your parents’ or your kids’ or your friends’.

         Yesterday a Federal Judge ruled in favor of 26 states that ObamaCare is unconstitutional. A stay has yet to be announced. Therefore, until a stay is executed, no one has any legal need to comply with the onerous ObamaCare health bill.

Pundits all agree that this issue will eventually end up at the Supreme Court and the decision will be upheld 5-4. The Supreme Court could be hearing this case in as little as 60 days, however it is expected the Justice Department will seek to delay the inevitable.

florida-hhs_distcourt-ruling013111       http://news.yahoo.com/s/politico/20110201/pl_politico/48563  http://www.newsmax.com/InsideCover/Cornyn-Senate-Obamacare-repeal/2011/02/01/id/384626?s=al&promo_code=B953-1

   Submitted by JS of Chicago

From the Florida Court’s Opinion ruling against the Constitutionality of Health reform…..It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place. If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be “difficult to perceive any limitation on federal power” [Lopez, supra, 514 U.S. at 564], and we would have a Constitution in name only.

        Rodger Vinson, a Florida Federal Judge ruled today that ObamaCare is unconstitutional:

“Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void. This has been a difficult decision to reach, and I am aware that it will have indeterminable implications.”

http://news.yahoo.com/s/ap/20110131/ap_on_bi_ge/us_health_overhaul

Editor’s Note: Does this mean we can now ignore ObamaCare mandates?

January 28, 2011 11:40 PM

The Brownsville Independent School District’s self-funded employee health plan cost the district less during 2009-2010 than it did during each of the previous two school years, BISD’s school board insurance committee learned Friday.

A summary provided to committee members by administration showed that net costs for the plan in 2009-2010 totaled $37.05 million compared to $43.45 million in 2008-2009 and $37.67 million in 2007-2008.

Per-employee, per-year costs also went down. In 2009-2010 the PEPY figure was $4,893 compared to $5,817 in 2008-2009 and $5,141 in 2007-2008. 

MAA took over as third-party administrator for BISD’s health plan in October 2009. The previous TPA was HealthSmart Benefit Solutions Inc., which administered the plan the previous two years. Before that the TPA was Mutual of Omaha.

In self-funded health plans, the TPA administers the plan on the employer’s behalf, providing a network of medical providers, claims management and other services.

BISD is in the process of suing HealthSmart for $14.5 million in allegedly higher medical claims and improper charges during the two years HealthSmart administered the plan. The lawsuit, filed in August, was the result of an independent audit.

On Friday, Wright told insurance committee members that between Oct. 1 and Dec. 31, 2010, 91 percent of all plan expenses went directly to the benefit of BISD employees and their dependents.

In an executive summary provided to the committee, MAA said the plan had a per-employee, per-month cost of $448.53, which calculates to $5,382 per employee per year. The report said Mercer’s National Study of Employers for 2010 showed a national average PEPY cost of $9,562, meaning BISD’s costs so far in 2010-2011 are 56 percent of the national average.

The calculations exclude the cost of biometric screenings for BISD employees, which are part of MAA’s wellness and disease management efforts.

Kathy Corder, the chief marketing officer for Personalized Prevention, MAA’s wellness and disease management provider, said the biometric screenings are showing encouraging results.

The screenings, which are conducted where people work, are free to employees. Laboratory work is paid for by the plan. Corder said there were 4,988 such screenings in spring 2010 and 4,896 in fall 2010.

Of those, 713 screening participants were referred to care management, Corder said, and 70 were found to be diabetics whose blood sugar was out of control. Those 70 are now controlling their diabetes, resulting in savings of as much as $2 million over the life of the employee.

http://www.bisd.us/Employee_Benefits_Risk_Mgmt/PDFs/Insurance_Committee/Health_Plan_Meeting.pdf

glong@brownsvilleherald.com

Editor’s Note: “How do we know we are doing much better this year than last year?” asked Don Pedro. “What was this year is last year plus or minus this year’s change,” replied the expert. “If change is the only constant why do we need to measure it? You dont know if something is better if you didnt know how to measure what it was before” countered Don Pedro. And out he went.

(Don Pedro is a well known local sage in Brownsville, Texas whose advice has guided several generations of loyal readers of the Brownsville Herald).

           If the BISD pepy (per employee per year) health care costs is $4,893, how does that compare to other local Valley school districts such as Rio Hondo, La Feria, San Benito, Mercedes, Weslaco, McAllen, PSJA, Sharyland, Point Isabel, Los Fresnos, and La Joya Isd?  Some of these districts have Blue Cross, others have HealthSmart and Texas True Choice.  A comparative analysis would be interesting.

Hospitals and Preferred Provider Organizations (PPO) are team players. They are business partners who have forged lucrative business agreements with each other at the expense of the unsuspecting, ill-educated and clueless consumer.

The scam is so well refined that the poor unsuspecting consumer is led to believe they are the recipients of a really good deal when in fact they are getting screwed big time.  Yet, consumers continue to count PPO’s as the good guys. After all, arn’t PPO’s  looking out for them by negotiating great discounts (as opposed to great savings) from their business partners, the hospitals?

Molly Mulebriar, forensic private investigator, has given us a bonafide fictional tape recording of a recent meeting between a PPO representative and a hospital administrator.  We have permission to release the transcript, redacted, which illustrates the PPO/Hospital scheme to screw consumers:

Hospital Administrator – Good to see you again Jack.  I really, really enjoyed that golf game last week – it felt swell beating you again – bought my wife a new  car thanks to you. Ha Ha Ha, Anyway, as you indicated in your email asking for this meeting, you want to maximize our cash flow by maximizing yours. What is your proposal?

PPO Representative – It’s easy. First, the largest school district in the area just hired a so called insurance consultant. Ive met with her, and she doesnt know s–t from shinola. Now is a good time to screw the district again, maximizing both your revenue streams and mine, while making ourselves look like local heros. Plus, we will make the new insurance consultant a hero too, for a continued relationship that will maximize her revenue as well. It is a win win situation for all of us.

Hospital Administrator – Great! What is the plan?

PPO Representative – Ok, here is the deal. You raise your senseless Charge Master, which is already inflated, arbitrary and has no relationship to costs, by 18%.  Then, I will go to the insurance consultant and tell her that because of her great talent in negotiating with us, we will increase our PPO discount from 35% to 45%.

Hospital Administrator – By God, she will be able to tell the district the new PPO contract will save them millions of dollars in discounts as opposed to savings! This is brilliant. But exactly how would this work?

PPO Representative – Ok, you raise your Bull Shit Charge Master by +18%. Don’t worry, no one will know since you will not release the Charge Master to the public. Then you sign an updated agreement with me to increase our PPO discounts from 35% to 45%. Of course you will continue to pay our PPO a 4% “re-pricing fee” of the discount. The net to the hospital is an overall revenue increase of 12% while we get a 29% increase in our re-pricing fee. We both win by not losing.

Hospital Administrator – Wait a minute, Im getting a 12% increase in an already inflated arbitrary Bull Shit number, while you are getting revenue maximization of 29%! I want part of that 29%!

PPO Representative – I am sure we can work that out. How about if I increase your revenue stream by directing more elective surgical admissions to your hospital? Would that help you out? What I will do is identify which local physicians routinely admit patients to the other hospital in town, and renegotiate our contracts with them. I will tell them that the more admits to your hospital, the more we will compensate them. It’s illegal but hey, it’s done every day.

Hospital Administrator – Ok, here is a list of local physicians I want you to contact. Raise their rates from 175% RBRVS to 225% RBRVS. I will let it be known, unofficially, that it was I who helped them out. They will certainly return the favor I am sure.

PPO Representative – Ok, but of course the district will see that their costs are increasing despite the better “discount.” What we need to tell them is the culprit is inflation. That your cost of business is going up and you simply have to pass those costs on to the consumer. Also, you can tell them you are losing your royal ass off Medicare and Medicaid patients.

Hospital Administrator – Right on! But between you and me, we are making money off Medicare patients who represent +60% of our patient revenue. And the more Medicaid and indigent care patients we treat, the more Medicare pays us. I just love those Medicaid and indigent care patients! I wish we had more of them.

PPO Representative – Yeh, I know, I haven’t met a hospital administrator yet who lost money on Medicare patients. If they did, their Board of Directors would find a replacement real quick.

Hospital Administrator – Ok, let me see if I got this correct. You are going to tell the insurance consultant that you negotiated a better contract for the district because of her amazing negotiating skills, the district is going to “save” money as a result while spending more, and my hospital is going to get an overall +12% raise in revenue while you get a +29% pay raise.  And, about 60 local physicians will get paid more money by sending their elective surgical admits to me rather than to my competitor across town. It that right?

PPO Representative – Yes! Good doing business with you. No one will ever know what we agreed to today. Our contract is proprietary – no one but you and me knows what is in it. Not even the insurance consultant. I love this business! Let’s go play golf. Ive made a “bet” with a local insurance agent for $35,000 that Im going to lose on the 18th hole  – it’s that time of year he contributes to some sort of scholarship fund at the district.  Wanna make the same bet?

Editor’s Note: This is a true fictional narrative provided by Molly Mulebriar. Mulebriar cautions that this transcript is not attributable to any particular institution, person or locale.

  Holding DentalPlans accountable to dental patients

Today, I got into a discussion with an anonymous DentalPlans sales rep who goes by “Dental Hygenie.” We are discussing the morality of deceptive advertising in the discount dentistry market and gullible, vulnerable dental patients. I’m hoping she’ll return to fasten down some loose ends. I’m pretty sure Hygenie is a woman.

“We don’t have our own dentists. We simply provide consumers with a list of dentists that accept dental plans. We are always researching and getting feedback. Thanks for all your questions Darrell, its been fun chatting with you today!”

My reply: I’m sorry you had to rush off, Dental Hygenie. I’ve sincerely enjoyed our conversation today and learned a lot about DentalPlans from you. I hope that the information we shared will help others understand their choice in dentists – including discount dentists promoted by DentalPlans who work for as little as 15% of their normal salary (A 30% discount based on an industry average of 65% overhead means a 5% net, versus a dentist’s full pay of 35% net). To clarify one of your statements, I should point out that you also wrote that DentalPlans dentists offer discounts as high as 60%. I think that quote must have been a typo. Anyone can see that if a dental practice has a 65% overhead, and sells dentistry at a 60% discount, the dentist would make more money by staying home. For example, if one nets a negative 25% on each widget one sells, making more widgets will only dig one deeper in debt. You really didn’t mean to advertise that DentalPlans offers 60% discounts, did you, Dental Hygenie? That would be misleading and probably illegal outside the Internet. Such deception certainly wouldn’t be ethical.

Even a 30% discount simply sounds incredible. As a dentist, I cannot imagine working 7 times faster to make the same amount of money I earn now, and still maintain the quality my patients expect of me. Dentistry is intricate, one-of-a-kind handwork performed to tight tolerances in juicy, wriggly mouths attached to occasionally nervous patients who sometimes show up late, or not at all. Please help me and others understand how dentists can discount their work by 85% and not go bankrupt.

I find another of your statements confusing. It may be a typo as well. You said, “You pay a one time fee starting at $79 for the year and start to receive your discounts almost immediately.” Did you mean to say there is a one time fee or a yearly fee starting at $79?

I’m hoping you will find time to return soon. I have other questions your potential customers would ask if they had a clue where to start. I’d like to discuss more about DentalPlans’ quality control with you. I’m glad to read that DentalPlans’ business partners like Aetna and BCBS scrutinize the dentists they send trusting and vulnerable patients to see. After all, to offer dentistry by the lowest bidders with no quality control would be morally bankrupt.

Whatever your name is, you just have to agree that since most people are clueless about dentistry, they are terribly vulnerable to being ripped off by anonymous salespeople. Let’s you and I make sure it doesn’t happen on Dental Facebook.

D. Kellus Pruitt DDS – pruittdarrell@sbcglobal.net

     I recently gave a keynote speech to a group of insurance brokers affiliated with the Institute for Work Comp Professionals; the talk focused on cost drivers in WC, with special emphasis on medical costs.

The part of the talk that generated the most discussion was the section on networks, and specifically how most WC networks have completely failed to reduce medical expenses.

My net is insurers are shooting themselves in the head, with a pistol provided by their managed care departments.

PPOs contract with providers to deliver services at a discount. Most PPOs get paid a percentage of the savings that is delivered by that discount, typically 15 to 22 percent of the savings. So, the more the PPO ‘saves’ the more it makes. On the surface, this sounds good: the system rewards the PPO for saving money and does not pay it when it delivers no savings.

However, a closer look reveals that when the PPO vendors win, the payer loses. The ugly head of the Law of Unintended Consequences emerges again.

At the most basic level, health care costs are driven by a relatively simple equation:

Price per Unit x Number of Units = Total Costs

Under a percentage-of-savings arrangement, reducing total cost is ignored in favor of saving money on unit costs. The PPO gets paid for savings on individual bills. Therefore, the more services that are delivered and the more bills generated, the greater the ‘savings’ and the more money the PPO makes.

The system encourages over utilization because it is in the PPO’s best interest financially to have numerous providers generate lots of bills for lots of services. Also, the providers, squeezed by a per-unit fee schedule that is lower than fee schedule/Usual and Customary Rates (UCR), have a perverse incentive to make up for that discount by performing more services.

The industry has been hit, and hit hard, by the Law of Unintended Consequences. Two of the top managed care “fixes” – fee schedules and PPOs with pricing based on percentage of savings, encourage over-utilization, a major cost driver for workers’ compensation.

It’s no wonder that most PPOs like this model, but why would any of their customers?

The simple answer is that managed care departments at many carriers and third party administrators (TPAs) are evaluated on the basis of their network penetration (the percentage of dollars that flow through a network provider) and network savings (on a per-bill basis).Their internal and external customers have bought into the per-unit discount model, and measure the success of their managed care programs on the dollars and/or bills that flow thru the network, and the savings below fee schedule or UCR delivered by the network.

The fact is few carriers, TPAs, or employers have realized that per-bill ‘savings’ is the wrong way to assess a managed care program. And unless senior management changes their evaluation methodology, their managed care departments will have no incentive to change their program to one that actually does reduce total costs.

After my conversation with a hall full of brokers, my bet is more carriers are going to be getting more questions about this.

Editor’s Note: This was written by Joe Paduda

   Guardian announced yesterday they are exiting the medical insurance market. They have sold their medical insurance block to United HealthCare.

Fewer carriers in the medical insurance market means less competition. Those carriers that remain, we believe, will focus on administering self-funded employee welfare plans – some will exit the fully-insured market due to stiff restrictions mandated by ObamaCare.

 Admitted Felon Olivarez Goes Free – Beats Justice System – Maintains Texas Insurance License

Half Guilty, Half Pregnant Arnulfo Olivarez was sentenced yesterday for his crimes. This admitted felon paid bribes to public officials in exchange for lucrative insurance contracts worth millions of taxpayer dollars.  

Arnulfo “Arnie” Cuahtemoc Olivarez
Insurance Agent
4 years probation
$25,000 dollar fine

Editor’s Note: The following is an excerpt published in the McAllen Monitor –

Arnie Olivarez: “I want to apologize to my family, especially my daughters and to everyone I’ve done business with.”

Arnie Olivarez: “It’s a common practice but it’s wrong.”

Judge Ricardo Hinojosa: “By doing that, you’re insulting every elected official and every business person who does it the right way, which I believe is the majority. They get hurt every time someone like you does what you did.”

Judge Ricardo Hinojosa: “This is not a victimless crime.”

Arnie Olivarez: “I hurt my family, lost my business, had to let go of of good friends. I’m trying to keep my insurance license. I had a major heart attack and I’ll have to take medication the rest of my life. I’ve been under house arrest the last three and a half years.”

Arnie Olivarez: “I want to apologize to the court and to everyone for all the things I did wrong.”

Judge Ricardo Hinojosa: “I wouldn’t be surprised if he deducted it on the federal income tax for his business making us all sponsors for this trip.”

Judge Ricardo Hinojosa: “I dont’ know how much profit your client made, I gathered it was a lot more than $10,000 dollars.”

Olivarez claimed his contract was worth $180,000 dollars per year for three years.

He said he got half, or about $90,000 dollars per year for three years, but had to use part of it to pay his own staff.

Olivarez claimed he told Cameron County Sheriff Omar Lucio and the former Hidalgo County Sheriff about bribery allegations. He said that went nowhere.

Olivarez said before he starting making “contributions” and “sponsorships” that the PSJA school illegally cancelled one of his previous contracts.

Judge Hinojosa said he should have gone to authorities and not “played along.”

Defense Attorney Heriberto “Eddie” Medrano: “He has been traumatized. This has been a three and a half year ordeal. He’s been waiting for this day.”

http://www.themonitor.com/articles/today-46495-case-mcallen.html

Amfels, the second largest employer in Brownsville, Texas, has decided to change their current PPO group health plan to a Cost Plus plan. Estimated savings are expected to be significant.

An analysis of an in-patient hospital claim from a local Brownsville hospital illustrates the potential savings to Amfels. Total billed charges were $118,143.43. This claim was repriced by a PPO network down to $76,793.23, for a “savings” of $41,350.20 or 35% off billed charges. We believe this is the same rental PPO network currently utilized by the Brownsville Independent School District.

Using a Cost Plus 12% or Medicare +20%, whichever is more, this claim was audited and repriced down to Medicare +20%, or $24,336.76, which represents +79% off billed charges.  Had a Cost Plus Plan been in effect at Amfels just 60 days ago, their self-funded group medical plan would have saved over $40,000 on just one claim.

This is an actual claim, incurred at a local Brownsville, Texas hospital, less than 60 days ago.  See audit here – Cost Plus Elap Audited claim.

Amfels is not the first Valley employer to change from a PPO plan to Cost Plus. Another large Brownsville based employer with over 500 employees embraced the concept over a year ago. They have realized significant savings.

Several Valley independent school districts have also made the decision to do away with their PPO plan and implement a Cost Plus plan later this year. An analysis of past claims for these groups shows estimated savings in the millions of dollars. With the state budgetary crisis looming, these districts are taking a proactive approach to cutting their health care expenses while maintaining and even improving benefits.

Cost Plus is not a new method of paying hospital claims. Medicare is utilizing a cost plus approach with select hospitals across the country – http://blog.riskmanagers.us/?p=3895

Editor’s Note: This blog has written about PPO network versus Cost Plus for several years. Many of our clients who have  elected to implement a cost plus plan have achieved significant plan savings as a result – See Bill Miller Forbes. The first political subdivision in Texas to adopt the concept was San Patricio County  – Health Care Strategies for Texas Political Subdivisions. The Brownsville Independent School District, currently in turmoil over truth and fiction regarding plan “savings” and which PPO has the best “discounts” should consider a Cost Plus approach. This Brownsville taxpayer whose local taxes have increased over 100% in the past ten years, would welcome any effort by the Brownsville Independent School District to cut unnecessary expenditures. A Cost Plus approach may be a very good step in that direction.

    Half Guilty, Half Pregnant Arnulfo C. Olivarez, licensed Harlingen insurance agent, will again face sentencing for his crimes before the Hon. Ricardo Hinojosa in McAllen, Texas next week.

Admitted felon Olivarez has plead guilty to bribing pubic officials  in exchange for lucrative insurance contracts.

A $4,000 Marachi band expense for a public official may lead Olivarez to hard time in federal prison. A $500 set of tires for a Valley school superintendent several years ago netted a three and a half year federal prison sentence. If a $500 bribe equals 3.5 years, what does a $4,000 bribe equal?

Editor’s Note: Type in “Arnulfo Olivarez” in the search box on this site to review earlier postings on Half Guilty, Half Pregnant Olivarez, admitted felon and still licensed Texas insurance agent.

The Brownsville Independent School District is seeking a qualified insurance consultant to assist the district in their $50 million self-funded health care plan.  Deadline for RFQ response is January 28.

To review the RFQ you may go to the Brownsville Independent School District website for a copy of the specifications (under purchasing department).

It will be interesting to see which insurance consulting firms respond. Cameron County and PUB both employ the same consultant from Dallas – he has the track record, experience, and credentials most consultants would envy. A McAllen consulting firm, with several local school districts as clients, may apply – this firm specializes in assisting Texas political subdivisions. Several other reputable consulting firms in San Antonio may apply as well, having experienced work in the Valley in the past, dealing with upper Valley school districts including Mission and Edinburg ISD. Then there are the large brokerage firms in Houston and Dallas – will they throw their hat in the ring?

Why would a group health plan employ both a fee based insurance consultant in addition to an agent working on a commission? And why would the group plan pay the consultant who does all the work  year round less than the the agent who does no work other than delivering a proposal once a year? 

Seems upside down.

Commissioners Bulletin # B-0041-07

TO: INSURERS, AGENTS, LIFE AND HEALTH INSURANCE COUNSELORS, RISK MANAGERS, AND ALL MUNICIPALITIES, COUNTIES, SCHOOL DISTRICTS, JUNIOR COLLEGE DISTRICTS, AND ALL OTHER LOCAL GOVERNMENTS, AND THE PUBLIC GENERALLY

RE: Use of insurance agents as “agents or brokers of record” by local governments

The Department has received inquiries concerning the employment of insurance agents, as “agents or brokers of record” by local governments.  This bulletin is intended to provide guidance that local governments and licensees may find useful when local governments are considering engaging Department licensees for assistance in the purchase of insurance products.  The bulletin will also relate prior Attorney General opinions related to “brokers of record” and the differences between an insurance agent license, a Life and Health Insurance Counselor license, and a Risk Manager license.

Summary:

• Texas Attorney General Opinion JC-205 advises that the purchase of insurance is the purchase of personal property, and opines that a school district may not contract with a licensed insurance agent to serve as an agent or broker of record unless the use of a designated agent or broker of record to purchase insurance is a purchasing method that has been expressly authorized by the legislature.
• Local governments and insurance agents are advised that the Texas Legislature has created two licenses, the Life and Health Counselor license and the Risk Manager license, which authorize persons to act solely on behalf of a client in an advisory or counseling capacity when considering the purchase of insurance products.
• The Department cautions insurance agents that Insurance Code §§4005.054 and 4052.055 and 28 Texas Administrative Code §19.1318 contain prohibitions against licensed persons accepting dual compensation for acting as both an insurance agent and life and health counselor or a risk manager for the same service provided to the same client.

Discussion:

Generally the purchase of insurance by a local government is the purchase of personal property and subject to competitive purchasing requirements.  (Texas Attorney General Opinion No. JC-205 (2000))  Often a local government, in compliance with applicable statutory competitive purchasing procedures, will issue a request for proposal seeking a “broker” to independently evaluate insurance products for the local government and for which the “broker” will be paid solely by the local government.  Although use of the term broker accurately represents a situation where a person represents the customer, local governments are advised that the Texas Department of Insurance does not issue broker licenses.  Additionally, Texas insurance agents are not authorized to act independently of the carriers they represent as described by Insurance Code §§4001.051(b), 4001.052, 4001.101, and 4001.201. 

This limitation on an insurance agent’s ability to procure insurance from any carrier was recognized in Texas Attorney General Opinion No. JC-205 (2000).  

“We understand that an insurance agent will be affiliated with a limited number of insurance companies. For this reason, a designated broker of record will not be able to solicit rates on the [junior college] district’s behalf from all possible insurance companies for a particular policy. Because the use of a designated broker of record will necessarily limit the number of companies from which the district may purchase insurance, it may foreclose the district’s access to the most advantageous rates and terms.  (JC-205, Page 2)

With respect to the use of insurance agents in the competitive bidding process, the Attorney General went on in JC-205 to hold:

“Even if a [junior college] district were to instruct a designated broker of record to solicit terms and rates using one of these methods, the district would not have used the method in its truest, most complete form. For this reason, we believe that the legislature must expressly authorize use of designated brokers of record, as it has done in the context of certain municipal insurance purchases.”  (JC-205, Page 6, referring to Attorney General Opinion DM -070), see also Attorney General Opinion JC-492).

The Department is aware of only two legislatively authorized exceptions with respect to local governments: Local Government Code §262.236, which is limited to counties with populations of greater than 800,000; and Local Government Code §252.024, which authorizes municipalities to engage brokers of record with respect to excess and surplus lines insurance. 

Local governments and insurance agents are advised that the Texas Legislature has created two licenses, the Life and Health Counselor license and the Risk Manager license, which authorize persons to act solely on behalf of the client in an advisory or counseling capacity when considering insurance products.  Both licenses are available from the Department. 

With respect to joint licensure and compensation, local governments and insurance agents are advised that the Texas Insurance Code does not prohibit insurance agents from holding an agent license as well as a life and health counselor and/or a risk manager license.  The Department, does, however, caution insurance agents that Insurance Code §4005.054 and §4052.055 and 28 Texas Administrative Code §19.1318 have prohibitions against licensed persons accepting dual compensation for acting as both an insurance agent and a life and health counselor or a risk manager for the same service provided to the same client.  Further, if an insurance agent or an insurance agent’s affiliate receives compensation from an insured, the insurance agent must make all applicable disclosures required under Insurance Code §4005.004.

Finally, persons holding an insurance agent license, a life and health counselor license, and/or a risk manager license are subject to disciplinary action under Insurance Code §4005.101 and Chapters 82, 83 and 84 for violations of the Insurance Code or Department rules, including engaging in deceptive trade practices under Insurance Chapter 541; acting without, or in excess of, their licensed authority; or engaging in fraudulent or dishonest acts. 

Additional information on this Bulletin and the license types described herein may be obtained from Matt Ray, Deputy Commissioner, Licensing Division, 512-463-8917.

Dragging claims can be an effective way to obtain competitive stop loss quotes prior to renewal. It is also an effective strategy to make year end results appear to be more favorable.

Most reputable TPA’s don’t employ this scheme, which ensures their continued good standing in the insurance community. Those TPA’s that make a habit of dragging claims are eventually blacklisted within the stop loss world.

How does a self funded employer detect the phenomenon of claim dragging? Continued review of monthly claim activity including pended claim reports as well as monthly lag reports are helpful.

Another indication of a TPA dragging claims is an uptick in provider and employee  complaints. If claims are delayed, employees with claims begin to get hounded by those providers who expect to be paid quickly. PPO contracts usually stipulate that claims must be paid within a certain amount of time or the PPO discounts are lost and the full billed charge is then demanded by the provider. The state of Texas has passed a law requiring insurers to pay claims within a specified time or be sanctioned.

Clearly, when claims are dragged, they eventually must be paid. A decision to release these claims rapidly causes a spike in claim activity which a descerning risk manager would question. The alternative method is a well managed slow but consistant release of claims over a 90 day period.

Towards the end of a contract that may be in jeopardy (political subdivision which is planning to bid out the service), the TPA may drag claims so that if the case is lost, they can then adjudicate the claims “post contract” at exhorbitant fees. Held hostage to a degree, the self funded employer is stuck with a bill that otherwise would not have occured.

We are aware of one Texas hospital which has offered to waive deductibles and coinsurance for a large self-funded employer group plan. Can a Texas hospital legally do this? Are self-funded ERISA plans exempt?

Waive Deductible Co-Pay

While health care costs are literally burning up dollars, many employers see only two answers: reduce benefits or increase premiums. The professionals at GM&A offer a real alternative. By creating a custom network for you, we will substantially reduce employer and employee’s medical costs and not change benefits! GM&A is a team of genuine medical insiders. We have over a century of combined experience in the areas of hospital administration, medicine, nursing and medical insurance. We’ve been helping employers and their employees for ten years. We put our expertise to work for you. We can develop custom networks that are uniquely suited to any geographical region and/or employee needs, as well as offer consulting service, auditing, or fully insured products. Through a combination of substantive negotiations with providers and vigilant plan monitoring, we are able to produce immediate and long-term reductions in you medical costs. Again, this is without changing current employee benefits.

– 5301 Knickerbocker Road, Suite 100, San Angelo, TX 76904 | (325) 224-3245 –

Editor’s Note: For more information go to www.gma-usa.com

According to recent media reports the Brownsville Independent School District has “saved” another $2.2 million by changing from the HealthSmart PPO network last year to the Texas True Choice PPO network. (Up from $6.8 million reported in October – see previous posting below) If true, the Brownsville medical community should be applauded. 

But has the BISD really “saved” money this year due to the change in PPO networks? Are office visit charges cheaper? Have the two local hospitals reduced their Charge Master pricing? Are prescription drugs cheaper too?

If the Texas True Choice network has significantly better pricing than HealthSmart, what kind of pricing does  Blue Cross have?

Some represent that Blue Cross  must have much better pricing since they command 28% of the Texas market.  They  provide coverage for federal and state employees too. They currently insure San Benito ISD, Los Fresnos ISD, McAllen ISD, PSJA ISD, Weslaco ISD, Mercedes ISD. Supporters point out that Blue Cross gained the business  through a competitive bid process aided by recommendations of independent insurance consultants.

If the move from HealthSmart to Texas True Choice “saved” $9 million,  and if Blue Cross does indeed have superior pricing with the medical community, imagine how much the BISD would save by moving to Blue Cross? $10 million? $15 million? $20 million?

Whoever has the best prices, whether it’s Texas True Choice, HealthSmart, Blue Cross, Humana, Cigna, United HealthCare should have all the business. It is that simple.

The truth is elusive. PPO contracts are as well guarded as all the gold at Ft. Knox. The truth is there to find – time to find it.

Original post below:

Medical Community Gifts $6.8 Million To Brownsville Independent School District

Numbers don’t lie! Or do they?

Two things to remember about numbers: first, the semantic premise imposed upon the calculation determines, in the eye of the unsuspecting, the “truth” which “supports” one’s contentions, i.e. “see I told you so, the audit proves we are getting screwed.” Second, numbers based on one methodology can be made to appear to change under a different methodology. And, multiple numerical entries can appear to skew a single numerical entry when totaled and compared as a percentage.

Consider three school district employees traveling to San Antonio on district business. They get off to a late start and arrive in the evening. They look frantically for a hotel, but all are booked. A national convention is in town, and there are no vacancies available.

But, finally, they get lucky. Tired, disheveled, they spot a “Room Available” neon blinking sign in front of the Blue Bonnet Motor Inn in South San Antonio. They ring for the attendant who finally appears and says “I have only one room left and the price is $30 cash.”

Relieved to find a temporary home for the evening, and resigned to the fact that all three would have to share the same room (what will the husband think of this Molly?” )  each plunked down $10 to pay the $30 daily rate – $10 X 3 = $30.

Shortly after encamping in their room, the hotel clerk realized he over-charged the three. The room was only $25 for the night, not $30. He called the Bell Hop and handed him five one dollar bills and said “Go to room 23 and give them a refund, I over-charged them.”

On the way to room 23, the Bell Hop, being a Democrat, decided requisition $2 and give each a $1 refund.

Here is the math – Each occupant paid $10-$1 = $9………………..$9 X 3 = $27    The Bell Hop Stole $2

Where is the missing $1?

Auditing PPO discounts   and payments can be conducive to a Fuzzy-Math-Out-of-Body-Experience. Careful attention must be made to (1) premise/s represented, (2) terminology employed and (3) Bell Hops.

And, fuzzy math can take a 25% cost increase down to a 10% increase very easily. It is done quite frequently in the insurance business. Anyone want to know how?

Editor’s Note: A good lawyer can make a bankrupt business look like MicroSoft, or vice versa. It’s done every day.

Change is Good

The TRS ActiveCare health insurance program for Texas public school districts has enjoyed stable rates and comprehensive coverage since 2003. Approximately 87% of Texas public school districts have joined the program. Most recently the El Paso Independent School District (+8,000 employees) joined effective January 1, 2011 (http://blog.riskmanagers.us/?p=4824).

A brief review of the TRS ActiveCare financials (TRS 2009 CAFR ActiveCare) indicates an erosion of plan assets. Most recent paid claim experience shows a loss ratio of 98.7%. Last year the trustees of the program raised premium but offset some of the increase by dipping into plan reserves. It does not appear they will have that luxury this year.

A 98.7% loss ratio deserves a rate increase. With ObamaCare mandates in play, and +$20 billion state budget deficit to be addressed in the current legislative session, what will the trustees do this year to ensure the continued solvency of the TRS ActiveCare plan? And where is the money to come from?

Rates for plan year 2011-2012 should be announced in March.

We received a call this morning from an actuary firm in Nevada informing us that one of their clients, a hospital system, has agreed to accept cost plus 12%  reimbursemet from all local political subdivisions whose insureds seek treatment at the hospital.

Details to follow.

Editor’s Note: In Texas we know of five (5) hospitals who have adopted the Cost Plus approach for their own self-funded employee benefit plans. We also know of several hospitals who have agreed to accept Cost Plus insureds and are happy to earn a 12% profit margin. And, recently, we have learned of one major hospital system who has agreed to accept Medicare +35%. This is encouraging to traumatized consumers who have been pounded with ever increasing health care costs, year after year, despite representations from PPO networks who tout “superior discounts” for their clients.

 www.ahd.com – look up hospital’s cost to charge ratio here. 

   We have learned that the reason the hospital system agreed to Cost Plus 12% is because the same system has contracted with a few local  payers on a flat per diem of $1,800 for both medical and surgical admissions, with no outlier. They will earn more under a Cost Plus 12% contract.

Another one of California’s largest health insurers has stunned individual policyholders with news of huge rate increases — this time it’s Blue Shield of California seeking hikes of as much as 59% for tens of thousands of customers March 1.

Blue Shield’s plan comes less than a year after Anthem Blue Cross tried and failed to raise rates as much as 39% for about 700,000 California customers.

San Francisco-based Blue Shield said the increases were the result of fast-rising healthcare costs and other expenses resulting from the new healthcare laws passed last year. “We raise rates only when absolutely necessary to pay the accelerating cost of medical care for our members,” the company told its customers last month.

In all, the insurer said that 193,000 policyholders would see increases averaging 30% to 35%, the result of three separate rate hikes since October that have been rolled into one for about 7,000 members.

Nearly one-quarter of the affected customers — 44,000 — will see cumulative increases of more than 50% over five months.

Blue Shield notified some policyholders of the rate increases in late December. That’s when Michael Fraser, a longtime Blue Shield policyholder from San Diego, learned that his monthly bill would climb 59%, to $431 from $271.

“When I tell people, their jaws drop and their eyes bug out,” said Fraser, 53, a freelance advertising writer. “The amount is stunning.”

The increases prompted complaints to new Insurance Commissioner Dave Jones, criticism on the Internet and letters to The Times. They are providing an early test for Jones, a former Democratic state assemblyman who targeted Anthem last year after it sought its big increases. . . .

Jones said the Blue Shield premiums underscore the need for the Legislature to give the insurance commissioner legal authority to regulate insurance rates the same way he does automobile coverage.

At present, the commissioner can block increases only if insurers spend less than 70% of premium income on claims. Jones’ office said that Blue Shield’s March 1 increase is still under review.

“Blue Shield’s increases pose the same problem posed by Anthem Blue Cross last year and other health insurers as well,” Jones said in an interview. “My hope would be that Blue Shield would reexamine these rate hikes, particularly in the face of the impact they are having on individual policyholders.”

Blue Shield said the cost of health coverage is being driven up by large hospital expenses, doctors’ changes and prescription drug prices. Blue Shield spokesman Tom Epstein said other factors also contributed to three increases in five months.

On Oct. 1, he said, Blue Shield imposed increases averaging 18%, and reaching as high as 29%. Those hikes had been delayed for three months while state regulators examined Blue Shield’s filing, costing the company tens of millions of dollars.

Epstein said Blue Shield raised rates again Jan. 1 to pay for reforms under the national healthcare overhaul and a new state law that bars insurers from charging women more than men. (Some policyholders will pay less under the state gender law, while others will pay more.)

A third round of hikes scheduled for March 1 comes in response to rising healthcare costs, he said. Those increases will average 6.5% and be as high as 18%.

Some policyholders have seen their bills rise gradually over the last five months, while others will see the charges lumped together March 1.

“It’s unfortunate that they all came in a five-month period,” Epstein said. “Rates are going to continue to rise unless the cost of medical care is brought under control. We need to reduce what we pay to hospitals, medical groups and pharmaceutical companies.”

Despite the large increases, Epstein said Blue Shield would again lose “tens of millions of dollars” on its individual business in 2011.

Not included in the rate increases are 78,000 Blue Shield individual policyholders whose insurance is regulated by a second state agency, the Department of Managed Health Care. Those customers have seen two rate increases since October that together average 37%, Epstein said

January 6, 2011

By JANELLE STECKLEIN

Blue Cross Blue Shield of Texas consumers can expect to pay more out of their own pockets for some treatment after negotiations between Northwest Texas Hospital and the region’s largest insurer failed.

As of Saturday, at the start of the new year, Blue Cross patients are now being charged out-of-network prices at Northwest, which means people needing specialized treatment – like trauma and wound care and some pediatric services that only Northwest provides – could potentially see costs increase by tens of thousands of dollars depending on the treatment.

Northwest houses the region’s largest designated trauma center.

John Greeley, a spokesman for the Texas Department of Insurance, said in most cases when someone goes out of network, it means that the amount of coverage from the insurer drops and the percentage of the bill the patient is responsible for rises.

According to the Texas Department of Insurance’s 2010 annual report, in 2009 Blue Cross was by far the state’s largest accident and health insurer. In 2009, Blue Cross Texans held about 27.3 percent of the market share for written premiums, according to the state.

Blue Cross spokeswoman Margaret Jarvis said Blue Cross will still pay in-network treatment costs, but the patient will cover the co-pay and whatever the difference is between what the insurer covers and the final hospital bill.

Jarvis said she wouldn’t speculate on the cost impact for consumers, but Northwest officials have previously said the patients’ out-of-pocket expenses could top tens of thousands of dollars on a trauma bill.

Starting in 2005, the hospital charged Blue Cross in-network prices – or essentially a discounted rate – for specialized services. But in September, hospital officials announced they canceled the contract with the insurer because Northwest was not a full network provider. Hospital officials said it didn’t make sense for them to offer Blue Cross a discount for specialized services when the insurer was directing patients with all other medical needs to Baptist St. Anthony’s Health System for treatment.

Both sides initially said they hoped talks could resolve the dispute before it affected patients’ pocketbooks, but negotiations ultimately failed.

Martin said the hospital “hates this (outcome) as much as everybody,” but still has to do business.

“We were the ones that canceled our contract,” said Northwest spokeswoman Caytie Martin. “They have refused to accept our calls to have any further conversations. Blue Cross is not willing to allow us to (be) a fully in-network facility.”

Jarvis said she doesn’t expect a big effect for consumers because they can get all their emergency care needs – minus trauma care – at BSA.

She said it’s up to Northwest how much extra the patient will have to pay.

“It’s up to them if they choose to balance-bill a patient and charge them over and above the rate that their insurance pays,” she said.

Martin said no contract means no discount for Blue Cross patients.

“We hope those that may be impacted by that decision have the ability to speak with their employers about their concerns that they don’t have trauma coverage,” she said.

Ultimately, Greeley said the state has little oversight on the relationship between insurers and hospitals other than to make sure insurers provide enough in-network specialists.

“We can’t change the fact that a particular facility and a particular insurer have parted ways,” Greeley said. “We can’t make that better.”

Greeley said the state offers a consumer hot line to help people understand their insurance bills and responsibilities.

“At some point they’re going to get a bill and they’re going to have questions about it,” he said. “(We can help) make sure it is according to the contract they have and answer any other questions.”

     Most medical stop loss insurance policies pay retail instead of lower, negotiated discounted fees. Most don’t know this and don’t care, “since it is the insurance company paying the bill.”  The fact of the matter is that we are all paying for the higher reimbursement rates in loaded premium charges, as much as 46% more.

Hospital PPO contracts contain outlier provisions. Once the outlier, or threshold is reached, a typical PPO contract then reverts back to a small percent off “billed” charges, all the way back to the first dollar. Many of these PPO contracts stipulate that the outlier discount is 5% off billed charges.

Billed charges are like new car sticker prices; there is no correlation between the sticker price and actual costs. It is an arbitrary made up number, and the number is put up there really high. That makes the PPO discount look really good. But it is all a game foisted upon the unknowing consumer.

So, if the PPO outlier is placed at $50,000, and a typical PPO average “discount” is 35%, then a $45,999 hospital bill is repriced through the PPO contract by 35%, or $32,499. But, if the claim comes in at $50,001, the discount is reduced to 5% and the PPO repriced bill then becomes $47,501. This represents a +46% increase in plan reimbursement to the hospital.

As you can see, it is in the best interest of the hospital to inflate the bill to exceed the outlier. They get paid more money. And is it no wonder that almost all PPO contracts prohibit the payer from auditing the hospital’s bill?

Do you get the picture now?

Could this pricing phenomenon be linked to increasing stop loss premium? Why would you pay a vendor for the privilage of paying exhorbitant fees to pay for exhorbitant hospital charges?

More and more employers who self fund their group medical plans are eyeing captives.

Editor’s Note: Compare your current stop loss premium with this report: http://www.iscebs.org/Resources/Surveys/Documents/stoploss10summary.pdf.

Also see HM Insurance article – http://www.imakenews.com/seroper/e_article000971860.cfm?x=b11,0,w (excellent piece)

     Texas Business reports: The Texas attorney general’s office recently resolved a state enforcement action against Mylan Laboratories Inc., which was charged with inaccurately reporting drug prices to the Texas Medicaid program.

Under an agreement, Mylan must pay $65 million to the state and the federal government.

 Texas’s share of the recovery is $23 million.

The state’s enforcement action against Mylan stems from the defendant’s failure to properly report the price of its drugs to the Texas Medicaid program.

Court documents filed by the state allege that the price Mylan provided to retail pharmacies caused the taxpayer-funded Texas Medicaid program to significantly overpay the pharmacies for certain generic drugs.

In 2007, Texas initiated legal action against Mylan and two other drug manufacturers. The first of those three cases settled last summer when Teva Pharmaceutical Industries, Ltd. paid $169 million to resolve claims brought by Texas, several other states and the federal government.

The three defendants named in the enforcement action were:

•           Teva Pharmaceuticals Inc. of Pennsylvania (with subsidiaries Lemmon Pharmaceuticals Inc., Copley Pharmaceuticals Inc. Ivax Pharmaceuticals Inc., Sicor Pharmaceuticals Inc., Teva Novopharm Inc. and Teva Pharmaceutical Industries, Ltd.),

•           Mylan Laboratories Inc. of Pennsylvania (with national subsidiaries Mylan Pharmaceuticals Inc. and UDL Laboratories Inc.), and

•           Sandoz Inc. of New Jersey (with subsidiaries Geneva Pharmaceuticals Inc., Novartis Pharmaceuticals Inc., Eon Labs and Apothecon Inc.).

In order for pharmaceutical products to be eligible for reimbursement from Medicaid, Texas law requires that manufacturers accurately report market prices to the taxpayer-funded program. The Medicaid program bases its reimbursement to pharmacies on the pricing information reported to it by drug manufacturers.

The State’s three-year investigation revealed that the defendants sold hundreds of Medicaid-covered drugs at steeply discounted prices to large pharmacies such as Wal-Mart, CVS, Walgreens, and others – but concealed this same pricing information from the Texas Medicaid program.

As a result, state officials were misled about current market prices for the drugs. When pharmacies sought Medicaid reimbursement for these drugs, the false price reports led the Texas Medicaid program to unnecessarily spend millions of taxpayer dollars on the defendants’ products. Thus, Medicaid reimbursed at significantly higher rates than the discounted rates already established between the defendants and these retailers.

The scheme was brought to the state’s attention by Ven-a-Care of the Florida Keys Inc., an industry whistleblower. Since 2003, settlements in the Ven-a-Care drug-pricing cases have recovered more than $300 million for the Texas Medicaid program.

Dear valued MileMeter customer,

We hope that you have enjoyed your Holiday Season and we wish you a healthy and happy new year!

In an effort to keep you informed, we are notifying you that the state has mandated an increase in the Texas minimum liability limits, in attempt to keep up with the steady increase of medical costs.  On January 1, 2011, the present minimum limits of 25/50/25 were replaced by the new minimum limits of 30/60/25.  We will continue to offer the higher limits of liability, which are 50/100/50 and 100/300/50.

Additionally, as part of our rate filing with the Texas Department of Insurance, we have implemented an overall increase in our rates, as medical expenses and the cost of automobile and property repairs continue to rise. The liability coverage increases will be around 7.4% on average.  If you also buy Physical Damage coverage, the overall increase could be between 8.65% and 11.15%.

These increases will go into effect only on policies that are renewed on or after January 1, 2011.  To see how much your policy cost will be affected, you may obtain a quote a new quote at any time.

Texas DPS and TexasSure will be verifying insurance coverage aggressively in the coming year.  We urge you to consider buying an additional 1000 miles of coverage at your renewal.  If you don’t use it all in this upcoming policy period, you will be eligible for a renewal credit.

Be safe, be smart, be economical, and stay insured with MileMeter.

Editor’s Note: Auto insurance purchased by the mile? That is innovative! We are satisfied MileMeter customers – we insure several of our vehicles with them at a pretty good savings. You can get a quote direct from MileMeter by going to their website.

Methodist Healthcare System has officially closed on its purchase of TexSan Heart Hospital from MedCath Corp. and its physician owners.

Under the terms of the deal, Methodist bought the hospital for $78.5 million. MedCath anticipates that it will receive $58 million in cash for the facility after paying liabilities, closing costs, taxes and acquisition costs related to the buyout of the minority interest owned by heart doctors.

The effective date of the transaction was Dec. 31, 2010.

TexSan Heart Hospital opened in San Antonio in 2004 as a specialty hospital. In 2009, TexSan earned an Excellence Award from HealthGrades, the independent health care ratings organization.

Charlotte, N.C.-based MedCath (NASDAQ: MDTH) currently owns an interest in and operates six hospitals in six states and has a total of 533 licensed beds.

Methodist Healthcare is San Antonio’s largest health system.

A Texas based physician sent this to us today:

Insurers Bid for State Medicaid Plans – This is interesting –  We just got a contract sent to us from United last week about this, wanting us to become providers in their ‘network’.  They’re probably preparing a bid to get some or all of this business in Texas.

 Where are all the providers going to come from to care for all these people if they’re only willing to pay Medicaid rates?  While I don’t know that to be the case,  maybe there’s some flexibility in what they’re willing to pay. 

 Wait until 2014 when all this takes effect.  If they can’t find providers for the Medicaid rates, and the state ends up having to pay higher rates to entice enough providers to see all these people, it will bust the state budgets.  Texas is short an estimated $20 B in the upcoming biennium.  It will be even shorter in 2013-2014.  There will be no choice except to raise taxes.  Texas will either have to create a personal income tax, raise the sales tax, or increase the business margins tax.   And every other state will be singing the same tune.  How’d you like to be living in California?

 Get ready.  The tsunami is coming.  Congress has done a masterful job of shoving the real costs of ObamaCare down to the states so the state legislatures can end up being the real bad guys by raising everyone’s taxes to cover the federal mandate.

 What a crock!!

Editor’s Note: See http://blog.riskmanagers.us/?p=4815

I posted this on my Facebook today. Now I’m going to go play pool.

I invite questions about dentistry

An article titled “Doctor-patient relationship compromised by Facebook,” written by Kate Taylor for TGDaily.com was posted recently.

http://www.tgdaily.com/software-features/53075-doctor-patient-relationship-compromised-by-facebook

“Doctors on Facebook risk compromising the doctor-patient relationship because many don’t use tight enough privacy settings. Researchers surveyed the Facebook activities of 405 postgraduate trainee doctors at Rouen University Hospital in France and found that almost three out of four had a Facebook profile. One in four logged on to the site several times a day, and half logged on several times a week.

Almost half believed that the doctor-patient relationship would be changed if patients discovered their doctor held a Facebook account, but three out of four said this would only happen if the patient was able to access their profile.”

For those with questions they are afraid to ask, I want to make this clear to my friends: That is so not me.

Recently, a few of my Facebook friends have privately asked me dental questions, and seemed to almost apologize for “bothering me.” It pleases me greatly to be able to help anyone. I’m from West Texas, not France .

 Darrell K. Pruitt DDS

darrelldk@tx.rr.com

 Show Promise in Reducing Health Costs for Self-Funded Employers

MyHealthGuide Source:  Marla Durben Hirsch, Todd Leeuwenburgh, Editor, Employer Health Benefits, Thompson Publishing Group, 12/21/2010, www.thompson.com

As the U.S. consumers of health care try to control costs while improving health quality, some experts are turning to the Accountable Care Organization (ACO) as the delivery model with the potential to meet both objectives.

ACOs are designed to provide financial incentives for providers to improve quality, eliminate waste and control the cost of health care. Under the ACO model, spending targets are set to reflect the expected costs of caring for the patients, and quality-of-care targets are set. When the ACO meets or exceeds the targets, stakeholders share in the savings.

After passage of the Patient Protection and Affordable Care Act (PPACA) which endorsed the ACO model for the Medicare program (called the Medicare Shared Savings Program), the number of providers and payers developing ACOs has risen substantially.

Louisville, Ky.-based Norton Healthcare and insurance giant Humana launched the Louisville region’s first commercial ACO in November 2010, according to Kenneth Wilson, Norton’s vice president for clinical effectiveness and quality.

Employers Can Reap Gains From ACOs

Many different forms of ACO have been created, often depending on the local provider market. As a result, whether employers can get in on the shared savings depends on:

1. whether they’re self funded or fully insured;
2. what kind of models are being offered in their area; and
3. what kind of business the employer is in.

Some of the different opportunities for employers include:

• Creation of an ACO for one’s own employees. Some employers have created ACOs for their own employees, much in the way that they’ve created health plans or on-site clinics. Methodist Health, a hospital system in Memphis, is one such employer, according to Christie Travis, CEO of the Memphis Business Group on Health.
• Direct contracting with an ACO. Some employers may have the opportunity to directly contract with the provider system that is forming an ACO. Under this model, the employer will not need to use a health plan as a middle man to offer the provider network, says Travis. The ACO will directly provide the continuum of care through its own provider network.
• Creation/sponsorship of the employer’s own ACO. A self-funded employer could sponsor and organize its own ACO. Some employers may even help a new ACO get off the ground by investing funds to assist it, perhaps for a piece of the projected shared savings, says Blau. “Employers can play an important role in the formation of ACOs. They bring expertise to the table [as to what is effective] and have been incentivizing their employees to take care of themselves,” says Wilson.
• Creation/sponsorship of an ACO using independent payers and providers. Some employers may be interested in creating and supporting an ACO for their own employee/retiree population. For example, the California Public Employees’ Retirement System (CalPERS) launched an ACO in January 2010 for its 40,000 CalPERS members in the Sacramento, Calif., area. The ACO is comprised of Blue Shield of California, Catholic Healthcare West, and Hill Physicians Medical Group, who all agreed to accept financial risk for the success of the program. The ACO has guaranteed CalPERS 5% in savings, about $15.5 million, and it appears that the ACO will meet its targets for 2010, says Ken Perez, senior vice president of marketing for MedeAnalytics, a health information technology company based in Emeryville, Calif.
• Employer accesses ACO(s) in its payer’s provider network, and is entitled to some of the shared savings. This is the model contemplated by Norton and Humana. The pilot ACO program will initially cover only employees of Norton and Humana, but will eventually cover all employers in town, says Wilson. It is anticipated that the participating employers, as well as Norton and Humana, will receive some of the shared savings.
• Obtaining health benefits from a commercial health insurance payer that includes one or more ACOs in its provider network, but no shared savings. In this model, the employer doesn’t directly share in the savings of the ACO. However, if employees are using the ACO, their services should be less expensive and they should be healthier because the ACO is working to meet quality and cost targets, notes Jordan Bazinsky, vice president for science and technology at Verisk Health, a health data analytics company based in Waltham, Mass.

When considering working with an ACO, employers should consider whether they should create or sponsor an ACO, directly contract with one, or access one via a health insurer. Determine their options.

ACO Downsides

Of course, there are some drawbacks to using an ACO. The National Committee for Quality Assurance, the private non-profit accrediting organization for health care organizations, hasn’t even finalized the criteria it intends to use to accredit ACOs. Several legal issues still need to be resolved, such as how an ACO can incentivize its providers to keep costs down and share savings without running afoul of federal anti-kickback, antitrust and other laws. Some ACO models may turn out to be less effective. “An ACO that’s just glorified capitation and under incentivized to provide good quality care won’t be good,” warns Bazinsky.

Some ACOs may also not succeed for financial reasons. There’s a tremendous amount of expense in forming an ACO, including creation of the infrastructure to collect data, coordinate care, and measure performance, the provision of clinical integration to reduce waste and inefficiencies, and installation of health information technology, which may doom many nascent ACOs, notes attorney Daniel Mulholland with Horty Springer in Pittsburgh.

There’s also a concern about the long-term viability of ACOs, which in the first few years may successfully reduce costs by increasing efficiencies and reducing expensive care but after a while may have hit the limit and can’t cut more to keep up the profits.

But the risks are minimal for most employers, since they won’t be financially on the hook, notes Wilson.

1. Look at ACO design. Determine which ACO best meets the company’s operational needs. For instance, some companies may allow patients to go out of network for care; others may not. Some may assign employees to a particular ACO, while others will let employees choose which ACO to be affiliated with, says Travis. A good ACO will have sufficient numbers of primary care providers engaged in leadership and management, and the major physician and hospital partners should have a track record of working together effectively says Wilson.
2. Make sure the ACO meets applicable criteria. For example, it needs to have a network of providers that is adequate for employee populations, and articulated quality goals. Ask what providers are in the ACO, and if your workforce has established relationships with them, says Wilson. “If 70% of your employees go to hospital A, you may want to use the ACO that hospital A is part of,” he suggests.
3. Ask if employers will be involved and/or will see any shared savings. If the employer is not creating its own ACO, it can still receive some of the shared savings, and should ask how savings will be shared if the ACO is successful. If you don’t ask who benefits from the generated savings, the insurer will benefit. At the very least, employers should ask payers how premiums might be affected if the employees use the payers’ ACO.
4. Make sure there’s a robust measurement system to see if the ACO is really improving quality and reducing costs. Clearly this is important if the employer is a stakeholder in the ACO. However, it’s also important even if the employer’s workforce uses an ACO simply because the ACO is part of a payer’s provider network. “You need to know which ACOs are better, so you can drive employees to providers that provide better care,” explains Bazinsky.

           http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-PhysicianHospital_31bus.ART0.State.Edition1.7daa48.html

Editor’s Note: Freedom to conduct commerce continues to being taken away by the government.

January 1, 2011

By ANDREW POLLACK

EXECUTIVES of a small insurance company in Albany were mystified when, almost overnight, its payments for a certain class of antibiotics nearly doubled, threatening to add about a half-million dollars annually in costs.

The reason, it turned out, was that patients were using a card distributed by the maker of an expensive antibiotic used to treat acne, sharply reducing their insurance co-payments. With their out-of-pocket costs much lower, consumers had switched from generic alternatives to the more expensive drug.

With drug prices rising and many people out of work, pharmaceutical companies are increasingly helping patients with their co-payments. The use of such co-payment cards and coupons and other types of discounts has more than tripled since mid-2006, according to IMS Health, an information company that tracks the pharmaceutical industry.

Last month, for instance, Pfizer introduced a new card that can reduce the co-pay on its blockbuster drug Lipitor to $4 a month, a savings of up to $50. That brings the out-of-pocket cost in line with what consumers might pay at Wal-Mart for a generic version of a competing cholesterol-lowering drug.

Drug companies say the plans help some patients afford medicines that they otherwise could not.

But health insurers and some consumer groups say that in many cases, the coupons are just marketing gimmicks that are leading to an overall increase in health care costs. That is because they circumvent the system of higher co-pays on costlier drugs that insurers use to encourage consumers to use less expensive products.

“The member is somewhat insulated from the cost of the prescription,” said Kevin Slavik, senior director of pharmacy at the Health Care Service Corporation, which runs Blue Cross and Blue Shield plans in Illinois and three other states. “In essence, it drives up the total cost of providing the prescription benefit.”

The Food and Drug Administration, meanwhile, is studying the effect of the discounts on consumer perceptions, concerned that the coupons will make consumers believe that a drug is safer or better than it really is.

The acne drug that produced higher costs in 2008 for the Albany insurance company was Solodyn, a once-a-day formulation of an antibiotic called minocycline. A month’s supply of Solodyn sells for more than $700 on drugstore.com, compared with about $40 a month for capsules of generic minocycline, which are generally taken twice a day.

Executives at Medicis, the company that sells Solodyn, have told investors that the co-payment card is used by an “overwhelming majority” of patients, and is largely responsible for doubling use of the drug, to 26,000 prescriptions a week.

Co-payment coupons and cards are distributed by drug company sales representatives to doctors, and are also often available directly to patients over the Internet. Patients present them at the drugstore when paying for their prescriptions.

Any shift to brand-name drugs can have a big impact on health care costs.

At District Council 37, a union representing public employees in New York City, 59 percent of claims for statins in the year ended in June 2009 were for brand-name products that cost the plan $17.3 million. The other 41 percent of claims were for generic statins, which cost only $179,000. A year ago, the health plan eliminated the co-pay on generic statins to encourage more use of them.

For very expensive drugs, co-pay assistance is almost de rigueur, because in some cases co-payments can be up to 20 percent of the price of the drug. Novartis’s new pill for multiple sclerosis, Gilenya, costs $48,000 a year, compared with $30,000 to $40,000 for rival drugs, which are injected. Novartis is offering to cover the entire co-pay, up to $800 a month, which is 20 percent of the drug’s monthly cost.

“It seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly” to insulate consumers, said Joshua Schimmer, biotechnology analyst at Leerink Swann, an investment bank.

Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, to about $30,000 a year, over the last five years, according to a recent report from the securities firm Jefferies & Company. To cushion patients, the company recently increased its co-pay assistance to as much as $1,200 a month.

“We do want to avoid big jumps in price, abrupt changes in price, which can have a negative impact on payers, physicians and, most importantly, patients,” Robert M. Myers, Jazz’s president, told analysts in November, as the company increased Xyrem’s price by 22 percent. He added: “The coupon program, I will point out, does help patients get low monthly out-of-pocket costs, and this is a program that we are definitely committed to.”

Drug companies defend the coupons, saying they are helpful to consumers and allow patients and doctors to make decisions based on medical reasons, not costs. In many cases, such as with Lipitor and Solodyn, the rival drugs are not exact generics.

Jonah Shacknai, the chief executive of Medicis, said Solodyn’s once-a-day formulation reduces side effects and makes it easier for people to take their medicine. He also said many insurers paid far less for the drug than the price on drugstore.com.

“No one is forcing anyone to prescribe Solodyn,” he said. “We think the public wins because we have facilitated access to a product that dermatologists are eager to prescribe.”

Amgen is offering to defray co-payments in excess of $25 per month for its new drug Xgeva, which helps prevent fractures caused by cancer that has spread to bones. In some clinical trials sponsored by Amgen, Xgeva proved more effective than its competitor, Zometa from Novartis, but at $1,650 a month, Xgeva’s wholesale price is twice as much.

The co-pay assistance is aimed at ensuring that differences in co-payments between the two drugs “aren’t driving medical decisions,” said Joshua J. Ofman, vice president for reimbursement and payment policy at Amgen.

Companies also say that lower co-payments help patients stay on their medicines. Studies have shown that patients are more likely to quit taking their drugs when the co-pay is high.

Drug companies cannot offer co-payment assistance for patients in federal programs like Medicare because such offers are considered an inducement to use a drug and in violation of anti-kickback laws. Some companies have responded by contributing to, or even helping to set up, charitable foundations that can provide co-payment assistance legally.

Massachusetts also bars drug company coupons, and on similar grounds. It is the only state to do so.

That became an issue for Tamara Starr, 25, a graduate student in journalism, when she moved from New York to Boston in 2008. In New York, she paid only $25 for a three-month supply of Betaseron, the Bayer drug that she uses to treat multiple sclerosis.

But in Boston, her co-pay is $75 a month. She said she was taking the drug as little as once a month, instead of every other day as she was supposed to. She has been hospitalized three times in the last year with symptoms from her disease, like vision loss. “I don’t want to make the choice of paying that $75 a month or putting that $75 toward my groceries,” Ms. Starr said.

Last spring, the Massachusetts House of Representatives voted 156 to 0 to repeal the ban on coupons. The state Senate eventually passed a more narrowly worded repeal, but it came too late in the session for the two bills to be reconciled.

Editor’s Note:  EXECUTIVES at insurers and pharmacy benefit management companies say they would like to counter the cards and coupons but are not sure exactly how to do so. One problem is that the information they receive from pharmacies does not specify whether the co-pay was made by the patient or by the drug company.

“The payer doesn’t know, and the P.B.M. doesn’t know,” said F. Everett Neville, chief trade relations officer at Express Scripts, a pharmacy benefits manager. “We have no ability to stop it and no ability to prohibit it.”

THIS WAS RECEIVED BY A PBM REPRESENTITIVE: It’s ironic that I had scanned in an example of this earlier today (see attachment). Concerning XXXX coverage, we specifically excluded drugs like the one mentioned in the article below after a series of emails on 10/27/2010.  That took care of those old antibiotics that were “reformulated” and then aggressively marketed to dermatologists.  It seems dermatologists are targeted for many of these campaigns.  The difficulty is that (PBM) never knows when one of these “copay cards” are used because it acts as secondary coverage.  The pharmacy processes the prescription on the (PBM) card as primary and then runs the copay card as secondary, so as far as we can tell, the patient paid the full copay.

The El Paso Independent School District , effective today,  is now enrolled in a government health insurance plan for district employees and their families.  The district ditched their self-funded health plan based on recommendations from their insurance consultant. See earlier posting on this blog – http://blog.riskmanagers.us/?p=4215.

El Paso ISD Benefits Committee Review – http://www.episd.org/file_mgr/finance/budget_review/minutes/2010/Approved%205-20-10%20BRC%20Minutes_JointComm_Austin%20HS%20Library_draft_Revised.pdf

El Paso ISD Benefits 2011 – http://episdbenefits.org/trs_activecare.php

The TRS ActiveCare program, currently insuring a  majority of Texas public school districts,  has enjoyed stable rates and comprehensive benefits since inception in 2002. Could this be evidence that supports the theory that government health insurance plans work better than private health insurance schemes?  

Participating TRS ActiveCare Districts – http://www.trs.state.tx.us/TRS_activecare/documents/trs_activecare_participation_list.pdf

Details of the TRS ActiveCare Plan – http://www.trs.state.tx.us/active.jsp?submenu=trs_activecare&page_id=/TRS_activecare/plans

This story is an appropriate way to enter the New Year, 2011, as we believe it portends of events to follow regarding the health care delivery system in this country. With ObamaCare now firmly in place, with a few phase-in mandates effective today,  and with more to follow, many believe that by January 1, 2014  ObamaCare will gain a strangle-hold on employer sponsored health plans, what’s left of them.  

Group health plans, like the El Paso Independent School District, will be firmly under government control.

Editor’s Note: If an employer can save millions of dollars on health insurance through a government health plan, does it make sense to take advantage of the savings? See – http://blog.riskmanagers.us/?p=4178. Will the Brownsville Independent School District consider joining TRS ActiveCare in 2011?

   South San Antonio Independent School District is seeking a qualifited health insurance consultant. The district employs approximately 1,500. Current carrier is Blue Cross and the plan is fully-insured. The district contributes $285.80 pepm.

Contact Mr. Andy Rocha, Director of Purchasing @ South San Antonio ISD. Proposals are due Jan. 6, 2011.

Editor’s Note: Unless the district wants to consider a self-funded health plan, the district is tied to four main health insurance companies active in the San Antonio market: Aetna, Blue Cross, Humana, United HealthCare. But which one has the best and lowest health care provider costs? All say they do, but can’t or won’t prove it. PPO contracts, they all chime, are proprietary.

December 27, 2010

PacifiCare Life & Health Insurance Co. put a proposed $120 million dividend payment to its parent company on hold under pressure from California insurance regulators seeking potential billions in fines.

After California Insurance Commissioner Steve Poizner ordered PacifiCare to halt the payment, the division of UnitedHealth Group (NYSE: UNH) notified Indiana regulators that it will not go through with a $120 million payment to two United subsidiaries. Poizner is seeking up to nearly $10 billion in fines from UnitedHealth for millions of alleged violations dating back to its acquisition of Indiana-based PacifiCare in December 2005 (BestWire, Sept. 9, 2010).

“While the investigation into PacifiCare is ongoing, the blocking of this payment is a critical victory because it keeps the money where it would be available to satisfy any order that is issued and pay accordingly the fines that go along with such an order,” Poizner said in a statement.

UnitedHealth — which previously said the size of the fine sought “has no basis in reality” — intends to successfully resolve the legal matter, which remains pending before a California administrative law judge. “We are puzzled by the commissioner’s statement because, as he is well aware, we are actively contesting his decision on the PacifiCare dividend through the process established by his own department. We continue to disagree with the commissioner’s attempt to use the dividend process to try to gain leverage in a separate case about administrative issues that have long since been addressed,” spokeswoman Cheryl Randolph said.

Texas Business reports:  Temple-based Scott & White Healthcare plans to build a new hospital in College Station.

The health care entity has acquired approximately 98 acres of undeveloped land that will be the home for a new 143-bed acute care hospital project.

The property was purchased from Weingarten Realty Investors and College Station ISD.

The five-story, 320,000-square-foot Scott & White Hospital-College Station will be located at the intersection of Texas Hwy 6 and Rock Prairie Road.

Construction is scheduled to begin early next year.

An adjacent 75,000 square-foot clinic is also proposed and will be built by a third party developer in conjunction with the hospital.

The hospital and ambulatory facility will be built within 90 days of each other, with a projected completion date of the summer of 2013 for both projects.

Scott & White Hospital-College Station will open initially with 119 beds and can be expanded to accommodate another 24 beds when the need arises.

“This new hospital brings Scott & White’s model of a seamless, continuum of health care—outpatient to inpatient to outpatient—to the Brazos Valley,” said Scott & White chief executive Alfred B. Knight in a prepared statement.  “Our focus on the highest quality, coordinated, cost-efficient health care is unrelenting.”

Scott & White Hospital-College Station will house an emergency department,  cardiac services including cath labs, neonatal intensive care unit, comprehensive cancer services, operating rooms, maternity services suites, endoscopic procedure suites, interoperative robotics and other specialty services, all supported by a pharmacy, comprehensive state-of-the-art imaging technology and other diagnostic capabilities.

“Patient demand for the excellent ambulatory care Scott & White has provided in the Brazos Valley sparked the building of our new clinic on Arrington Road,” said Scott & White College Station region executive William Rayburn in a prepared statement.  “Scott & White Hospital-College Station will be an open staff model hospital and will complement and support both clinics, while enhancing our ability to better serve patients through seamless handoffs between the clinic and the hospital.”

Jason Jennings has been named chief executive officer for Scott & White Hospital-College Station. Jennings previously served as chief operating officer for Hillcrest Baptist Medical Center, one of the 12 hospitals and hospital partners in the Scott & White Healthcare System.   He is a graduate of Texas A&M University, where he earned a bachelor’s degree in biomedical sciences.  He also holds master’s degrees in physical therapy from the University of Texas Medical Branch and in business administration from the University of Texas at Tyler.

 Scott & White Healthcare is a non-profit collaborative health care system established in 1897 in Temple.  The system, one of the nation’s largest multi-specialty group practices, provides personalized, comprehensive, high-quality health care enhanced by medical education and research.  The system’s Temple campus serves as the principal clinical four-year teaching facility for the Texas A&M Health Science Center College of Medicine.  Scott & White Healthcare staff of 12,000 includes more than 800 physicians and scientists and nearly 400 specialized health care providers. The system’s 12 hospitals or hospital partners include Scott & White Hospital-Brenham, and more than 60 clinic locations throughout Central Texas, including Scott & White College Station Clinic on University Drive and Scott & White College Station Clinic-Arrington Road.

Boy was I ever ripped off for a dental degree!

I spent 4 years in college and 4 years in dental school, and according to a CNBC article with no byline titled “ Alaska ‘s efforts on rural dental care paying off,” I could qualify for this job after only 2 years of study right out of high school. What’s more, instead of it costing me tens of thousands of dollars in tuition, the state of Alaska insists that corporations will pay for dental therapists’ education as part of the deal… with strings attached of course.

http://www.cnbc.com/id/40734187

“Organizations that employ certified dental therapists are Yukon Kuskokwim Corp, Southeast Alaska Regional Health Corp., Maniilaaq Assoc. (Kotzebue), Norton Sound Health Corp. and Bristol Bay Health Corp.”

In return, dental therapists must serve those corporations for four years to pay them back for their investment in the state certification, as well as produce income to cover the corporations’ liability and adequately compensate CEOs for their cleverness in business. Since DDSs aren’t trained to make shrewd business deals like the Alaska plan, I bet the CEOs are MBAs.

Aren’t there laws against this kind of business arrangement in the 49 states south of Alaska ?

Other than the indentured servitude problem, did not one of the RTI researchers hired by W.K. Kellogg Foundation to turn out swell research, have anything at all to say about risks of having inadequately trained high school grads performing surgery in the middle of nowhere? Did not one of the 14 therapists experience an unexpected treatment complication that required the skill and training of a real dentist – and quickly? Since the therapists work under “general supervision” of fully-licensed dentists in Alaska, rather than ”direct supervision,” how far away by plane will the DDS be when unanticipated problems predictably arise? Mysteriously, issues involving tedious parts of the Hippocratic Oath were not covered in the CNBC article.

Are those reaping the profits from this experiment in iatrogenics properly informing Alaskan parents who live in unnamed communities that the dental care their children receive is inferior to that provided by a fully trained dentist? Or perhaps RTI researches have proven that the additional, traditional education makes no actual difference in dental care.

Since there is no bad news to report, politicians could conclude from the CNBC article that the level of care provided by dental therapists with 2 years training is equivalent, or even superior to dentists’ who have four years of post-graduate training. It looks to me like Alaska is proudly racing New Zealand’s to the bottom to save money on dental care in the short term while incidentally boosting corporate profits the American way. So why not push the envelope of humane treatment, and include a capitation plan run by and for Dental Health Maintenance Organizations?

As I write this, the Texas HHS is proposing capitation to state lawmakers as a way to save money on Medicaid dentistry for children in Texas who have no choice or voice. Rather than paying per filling, DHMO corporations reward neglect on a per-head basis. I suppose worse things could happen for dental therapists’ patients.

 Since CNBC’s obviously biased article has no byline, it’s a sure bet it was not written by a CNBC reporter. So who purchased this press release? Follow the tuition.

 D. Kellus Pruitt DDS

Why deal with the hassles and uncertainty of the yearly HHS mini-med waiver process for annual limits and loss ratio? It is likely that the exceptions provided under the waiver process will change next year. Ternian can offer you and your clients stability in this marketplace. Our fixed indemnity limited-benefit medical plans are not subject to the health insurance reform provisions of PPACA.

On-Site Health Centers: Value, Evidence, Toolkit, Wish We Had Known, More

MyHealthGuide Source: National Business Group on Health, 12/2010, NBGH Resource Page and Complete Toolkit available for download

To assist employers considering establishing an On-Site Health Center or those that would like to improve or expand their offerings, this toolkit offers general guidance for determining the key strategic and operational answers that need to be addressed in order for your center to be a success.

Employers are continually searching for ways to improve the health of their employees, control health care costs while still providing quality health care and provide benefits that their employees will truly value.

One potential solution is the development and use of on-site health centers (OHCs). OHCs are not a new concept; they have been used to address occupational health needs for decades. However, in recent years innovative employers have looked to redesign OHCs, transforming them from occupational health clinics to health centers that treat both the acute and chronic medical needs of their employees.

To assist employers that are considering establishing an OHC or those that already have such centers but would like to improve or expand their offerings, the National Business Group on Health has developed this toolkit, The Value of On-Site Health Centers. Because opening an OHC is a major undertaking, with design and implementation unique to each company, the toolkit offers general guidance for determining the key strategic and operational answers that need to be addressed in order for your center to be a success.

Complete Toolkit available for download.

Toolkit Components 

•  Making the Business Case: What is the Evidence on Cost Savings? Provides a summary of the evidence of the value of these centers and cost savings associated with them.
• Strategic Decision Guide: Questions to Consider before Opening an On-Site Health Center: Outlines the key decisions that an employer needs to make in order to guide the development of an OHC.
• Operational Decision Guide: Reviews the important decisions that need to be made when opening a health center, such as the amount of space needed, hours of operation and cost-sharing arrangements.
• Evaluation Measures: Discusses the right metrics to use to track and quantify the cost and benefits of OHCs.
• Vendor Assessment Tool: Provides a summary of important questions you may want to ask OHC providers to help you determine if they are the right partner (or partners) for you.
• Using Communications to Drive Utilization: Presents tactics and timelines you should consider when developing your communications strategy.
• Wish We Had Known: Key Lessons From Employers: Employers that have “been there” provide insight into what they wish they knew before they started down the path of opening an OHC.

About the National Business Group on Health

The National Business Group on Health is the nation’s only non-profit organization devoted exclusively to representing large employers’ perspective on national health policy issues and providing practical solutions to its members’ most important health care problems. The Business Group helps drive today’s health agenda while promoting ideas for controlling health care costs, improving patient safety and quality of care and sharing best practices in health benefits management with senior benefits, HR professionals, and medical directors from leading corporations. Business Group members, which include 64 Fortune 100 companies, provide health coverage for more than 50 million U.S. workers, retirees and their families. Visit www.businessgrouphealth.org.

Controlling costs will require health plans to build small, tight, highly-managed networks of excellent providers. The current PPO (better known as APO’s – All Provider Organization) system simply does’nt work.

Employers could offer two plans: One that provides inexpensive comprehensive cover and makes economic sense and one that provides expensive comprehensive cover that makes no economic sense.

The benefits under both plans would be identical.

The “entitlement crowd” can buy up (in other words, pay for) the outrageously expensive comprehensive cover that makes absolutely no economic sense while the remaining participants enroll in the employer paid inexpensive comprehensive cover that makes economic sense.

This is how to control group medical costs.

December 24th, 2010

The cost of health insurance for the average working American more than doubled over the last decade, leaving many Americans feeling like they’re at the mercy of insurance companies, with no control over when the next exorbitant rate hike was coming.

That’s not okay. And now it’s starting to change.

Just yesterday, we announced a proposed new policy to help hold insurance companies accountable. These new proposed rules would allow the Department of Health and Human Services, in coordination with states, to require many insurers to publicly disclose and justify unreasonable rate increases.

For too long, it’s been all too common to open your mailbox this time of year and find a letter from your insurance company saying your premiums are going up 20, 30, or 40 percent – often with little or no explanation. 

Whether it’s insurance for yourself, your family, or your small business, this is the kind of news that not only spoils your holidays, but can also endanger your health care coverage – and your health.

These new rules bring unprecedented transparency and oversight to insurance premiums to help states reign in excessive and unreasonable rate increases that have made insurance unaffordable for so many families.

Rather than explain all the details in an email, here is a video where I explain the new proposed rules and why they are important for your health:

Click Here to Watch My White House White Board Video

We believe that shining a light on insurance premiums will convince more insurers to think twice before submitting large rate hikes, the impact of which will be felt by millions of Americans.

This is our latest step to put health care where it belongs – in the hands of consumers instead of insurance companies. 

Please help to spread the word and share this video with your friends and family this holiday season. And for more on our efforts to hold insurers accountable, read this blog.

Happy Holidays,

Kathleen Sebelius
Secretary of Health and Human Services

Editor’s Note: Below are a few uncensored comments received from readers of this blog:

Peter Suderman | December 21, 2010

21 Dec 2010

Today the Obama Administration said it would require health insurers to disclose and justify any increases of 10 percent or more in the premiums they charge next year.

The administration, said in proposing regulations to enforce the requirement, that state or federal officials will review the increases to determine if they are unreasonable.

Kathleen Sebelius, the secretary of Health and Human Services, said the review of premiums would “help rein in the kind of excessive and unreasonable rate increases that have made insurance unaffordable for so many families.”

The new health care law, signed in March by President Obama, calls for the annual review of “unreasonable increases in premiums for health insurance coverage.” The law did not define unreasonable.

Under the proposed rules, insurers seeking rate increases of 10 percent or more in the individual or small group market next year must publicly disclose the proposed increases and the justification for them.

“Such increases are not presumed unreasonable, but will be analyzed to determine whether they are unreasonable,” the administration said.

Starting in 2012, the federal government will set a separate threshold for each state, reflecting its cost trends, and insurers will have to disclose rate increases above that level.

Under the proposed regulation, the federal government will evaluate each state’s procedures for analyzing insurance rates.

If the federal government finds that a state has an “effective rate review system,” the state would conduct the annual reviews of premium increases.

But, the administration said, “if a state lacks the resources or authority to do thorough actuarial reviews, the Department of Health and Human Services would conduct them.”

The federal government will post information about the outcome of all rate reviews on the department’s Web site, and insurers must post the information prominently on their Web sites.

Under the new law, insurers that show “a pattern or practice of excessive or unjustified premium increases” can be excluded from the centralized insurance market, or exchange, that is to be set up in each state by 2014.

In February, just one month before Congress completed work on the health care bill, President Obama proposed giving federal officials the power to block excessive rate increases by health insurance companies. Congress did not accept the proposal, choosing instead to leave rate review primarily in the hands of state officials.

An official at the Department of Health and Human Services said Tuesday: “The statute does not give us authority to disapprove rates. We do not have that authority. The regulation leaves state laws intact. It does not interfere with state law. In some states, rates cannot be put into effect unless the state affirmatively approves the rate increase.” In other states, insurers must file rates with a state agency before using them, but the state does not approve or disapprove rates.

The federal government has awarded $46 million to states to enhance their review of premium increases — the first installment of $250 million that will be distributed for that purpose from 2010 to 2014.

Under the new regulation, a federal health official said, “we are not setting an absolute numerical standard for whether a rate is unreasonable.”

Instead, the proposed rule lays out factors to be considered. It says that a rate increase will be considered unreasonable if it is excessive, unjustified or “unfairly discriminatory.”

A rate increase is defined as excessive if it “causes the premium charged for the health insurance coverage to be unreasonably high in relation to the benefits provided.”

In addition, under the rules, the assumptions used in calculating a rate increase must be based on “substantial evidence.”

Ms. Sebelius said that since 1999, the cost of health insurance for the average working American had risen 128 percent

  Capitation dentistry, midlevel providers and sinfully huge tax savings

 On December 7, I posted an opinion piece on The American Way of Dentistry titled “Is the nation really ready for two-tiered dentistry?” (On the 8^th, it was picked up by the Medical Executive-Post as “Dental Therapists [Emerging New Providers?].”)

http://medicalexecutivepost.com/2010/12/08/dental-therapists-emerging-new-providers/

 Yesterday, a reader named Tom opened the door for me to further expound on my opinion of midlevel providers and a future of multi-tiered dentistry. I’ll be sharing this conversation with my state and national lawmakers as well. Do you think I’ll get any responses?

 Tom says: “It already exists. There are insurance based practices and fee for service practices and if you don’t think there’s a difference in quality…..”

 I agree with you, Tom. But I should warn that as dentists, you and I are now skirting the fringes of unwritten rules of “professionalism” should we openly mention that managed care dentistry is dentistry by the lowest bidders with no quality control.

 It’s also politically incorrect to reveal that one can go to the dentist rating site, DR.Oogle (doctoroogle.com), and quickly research preferred providers’ popularity with patients compared to other practices. Invariably, the managed care practices average in the lower half of the ratings by the only critics who matter.

 Indeed, dental patients across the nation confirm that there have been two tiers of dentistry for decades: First is fee-for-service controlled by freedom of choice and marketplace competition, and then there is a second, preferred-provider tier controlled by discount dentistry brokers like Delta Dental, United Concordia and BCBSTX according to cost. Now a third tier is in the race for the bottom – capitation dentistry, and it’s coming to a state near you.

 Decades ago, the concept of paying dentists on a per-head basis rather than per-filling was soundly rejected by Americans for good reason: It proved to be unethical to encourage even a professional to profit from neglecting patients’ health. It’s much, much better to make someone work for their pay. Nevertheless, capitation is returning to the dentistry marketplace. In Europe, the UK ’s National Health Service (NHS) which provides free dentistry as an entitlement will soon begin a pilot program to carefully investigate the promise that capitation will indeed solve the nation’s access problem before making the benefit plan law.

 On the other hand, the Texas Dept. of Health and Human Services has guts. Naïve leaders in the state organization intend to persuade lawmakers to turn Medicaid dentistry into capitation immediately without bothering to even ask dentists about it. How is that not bureaucratic bonehead?

 The 1980s sales pitch went something like this: “We pay dentists for quality outcomes instead of unnecessary crowns, and pass on the savings to you!”

 The difference of 25 years? This time, capitation decay will be ignored, then delayed and finally treated by non-dentists instead of dentists. The pitch: “It will cost taxpayers even less to provide dental care to the poor (including avoidable, painful complications – which are contractually up to the dentist to resolve). And who will be the unfortunate dental patients? Children in Texas from poor homes who have no choice where to go for dental care and whose complaints matter little if at all.

 There is no latent fairness in “tiered” dentistry. Only different levels of pain.

 D. Kellus Pruitt DDS

Health insurance companies and their role in employee benefits and health insurance in general in a couple of years will definitely be VERY different.  PPACA has poison pills for insurers sprinkled throughout the law, designed to punish and/or squeeze them out of any profitable role.

Let me give just four examples:  >MLR squeezes their operations top to bottom and distribution network (commissions).  >Also,  I suspect that insurers will find participation in state exchanges will be money-losing.  >It looks like insurers are going to increasingly be squeezed into one-size-fits-all policy design, with little room for innovation.  >The power of bureaucrats to dictate what they feel is “unreasonable” premium for an insurer to charge is like a fatal cancer, since government officials are notorious for having no idea of the actual claims cost impact of things governments cavalierly mandate.  Any one of these would be enough to drive most companies out of the business.  If insurers become money-losers, then stockholders & management will rebel….and, ironically, the same state officials imposing many of the losing requirements will tell insurance companies that they are not adequately funded to remain in business.

So, it is hard to envision how or why insurers would want to stay in the US health insurance market.  They have an overseas option.  As I have mentioned before, because many entities check with SPBA as a resource on trends in the health & benefits arena, I had learned about two years ago that insurers were exploring other markets in case the US market was closed to them (such as a government single-payer plan).  They identified what look to be profitable markets in parts of Asia & Europe…and with the bonus of usually no government micromanagement.  So, you notice the trickle of announcements of insurers opening or expanding their overseas markets.  So, that will provide new income to replace withdrawing from the US market. Editor: Cigna in China, Humana in GB, etc.

HOW MIGHT INSURERS REMAIN IN THE MARKET?  Some may become the financial part of an ACO.  Some may find niches that work in state exchanges or other programs, especially if states are successful in getting waivers for MLR & state exchanges (but waiver simply means states will impose their own rules). 

Many insurers already have as much as 2/3 of their business in self-funding as ASO under their own name or via investment in independent-name TPAs.  Since anything with the name (or even erroneously perceived by government as in any way) an “insurance company” will tend to face the harassments in PPACA, even if they are not performing “insurance” functions.  So, I think the corporate decision will be to centralize all their self-funding into the independent-named TPA .  So, I think that the biggest chunk of continuing  insurance company corporate income will be via the independently-named (and…important…independent-acting) TPA.

Editor’s Note: This is an excerpt from Fred Hunt’s email blast of Dec. 20, 2010

November 16th, 2010 by David E. Williams of the Health business blog

Alternative Pharmacy Network Whitepaper December 16, 2010

Health care reform requires employers to calculate and report the aggregate cost of applicable employer-sponsored health insurance coverage on employees’ Form W-2s. Although the new rule applies for employees’ tax years beginning after Dec. 31, 2010, payroll systems need to be updated for this change by January 2011. This deadline is imposed because employees are entitled to request their Form W-2s early if they terminate employment during the year.

[Update:  The IRS announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011. See Draft Form Issued for Reporting Health Care Costs on W-2s; Requirement Made Optional for 2011.]  I attached this article below.

Plans for which coverage costs must be reported under the new requirement include:

• Medical plans.

• Prescription drug plans.

• Executive physicals.

• On-site clinics if they provide more than de minimus care.

• Medicare supplemental policies.

• Employee assistance programs.

Coverage under dental and vision plans is included unless they are “stand-alone” plans. However, the cost of coverage under health flexible spending accounts, health savings accounts and specific disease or hospital/fixed indemnity plans is excluded from the reporting requirement.

How to Value Plans

The aggregate cost of coverage under the plans (including the employee and employer portions of cost) is determined under rules similar to COBRA—minus the 2 percent administrative charge permitted under COBRA. Government regulations regarding how to value plans for COBRA purposes were, as of this writing, expected shortly. Presumably, any regulations issued would apply to COBRA and to the new Form W-2 reporting requirements. One challenge for employers might be that some of the plans covered by the new reporting requirement, such as on-site medical clinics, are not plans that they have previously valued for COBRA purposes. Now, employers will need to come up with reportable values for coverage provided under these programs.

Monthly Coverage

The new reporting requirement appears to require a monthly calculation of coverage. However, some employees might have less than a month’s coverage if their coverage starts or stops during the month. Future regulations might clarify how to report coverage of less than a full month.

Reporting is required for employees but also seems to apply to former employees who are provided with health coverage, including early retirees, retirees, terminated employees on COBRA and surviving spouses. Many of these individuals would not typically receive a Form W-2 from the employer, at least not for taxable years following their termination of employment. Accordingly, if this interpretation is correct, an employer’s overall W-2 reporting requirements may increase dramatically. Employers should begin working with their payroll departments immediately to ensure compliance with these new requirements.

Maureen M. Maly is a partner with Faegre & Benson in the law firm’s Minneapolis office. Her practice focuses on employee benefits with a particular expertise in welfare benefits issues.

11:36 PM CST on Friday, December 17, 2010

By JASON ROBERSON / The Dallas Morning News
jroberson@dallasnews.com

Just two weeks before more than 1.3 million North Texans would have been forced to scramble for new doctors, the region’s largest insurer and largest hospital system agreed late Friday on new contracts.

The multiyear agreement will allow Texas Health Resources’ 24 hospitals, 18 outpatient facilities and physicians to remain in the network of Blue Cross Blue Shield of Texas.

For several weeks the Arlington-based hospital system and Richardson-based insurer took public stabs at each other as they neared a Dec. 31 deadline to sign a new contract covering reimbursement rates.  (See http://blog.riskmanagers.us/?p=4550) After that date, Texas Health could have been considered out-of-network for Blue Cross members.

“We’ve worked hard over the past several months, and it has resulted in the right agreement for our patients,” said Douglas Hawthorne, chief executive of Texas Health.

“The new agreement focuses both parties on improving the long-term affordability of health-care services,” said Blue Cross president Darren Rodgers.

In recent interviews, the two have disagreed on who bears more blame for expensive health care. However, both have said it’s time to base health-care payments on the value of care, not the volume of care.

Dispute details

The companies gave no clues about what’s in the new contract. Blue Cross had said Texas Health was demanding an additional $120 million over three years to cover cost increases. Texas Health had complained that Blue Cross wanted to give it a lump sum payment rather than reimburse for health services after care was delivered.

In many ways, the contract dispute is a study in health care’s corporate power shift. Twenty years ago, it may have been unlikely for a hospital to go toe to toe with the likes of Blue Cross. Hospitals were more fragmented, negotiating on a solo basis.

In the 1990s, hospitals began consolidating. Texas Health was formed in 1997 by combining the Fort Worth-based Harris Methodist Health System with Dallas-based Presbyterian Healthcare Resources.

The dispute also underscores the widespread frustration over rising health care expenses. Insurers are under pressure from employers to contain costs. Hospitals are under pressure to deliver quality care for an increasing number of uninsured patients, which drives up costs.

In Dallas, total health benefits cost an average $9,174 per employee this year. Local employers are expecting a 5.4 percent increase in health care costs, according to a survey from Mercer, a consulting, outsourcing and investment firm.

Editor’s Note: A reader of this blog sent the following note:

     As we all knew Blue capitulated to the almighty Texas Health Resources before 1/1.  It even says 20 years ago “it may have been unlikely for a hospital to go toe to toe with the likes of Blue Cross.  Hospitals were more fragmented, negotiating on a solo basis”.  “In the 1990s, hospitals began consolidating. Texas Health was formed in 1997 by combining the Fort Worth-based Harris Methodist Health System with Dallas-based Presbyterian Healthcare Resources”.   The article basically says even the almighty Blue cannot negotiate with these powerful hospital systems and this is why costs are rising at an exponential rate. 

When is the American public going to “wake up and smell the coffee” about the abuse we are taking by paying such high costs to these monopolies.   I predict the government will have to step in if we don’t try using the free-market system of competition under cost plus and direct contracting.    The article says both parties will not reveal what is in the contract.  Imagine the secret negotiations.  Employers are tired of this backroom dealing along with rising costs.  We know Blue as a carrier will be passing on this huge increase to employers and will somehow still make more money themselves.  Thus both parties won and the losers are employers/employees.   We heard that THR was also demanding a “no audit” clause to be signed but graciously gave a bigger “discount” for this term.   THR has been demanding this in the last year with all PPO’s.  The power has shifted in the last 10 years to the hospitals and we definitely need change.

A Brownsville hospital is reported to have soaked an insured patient thousands of dollars for an emergency room visit recently. A brief visit to the emergency room produced billed charges in excess of $4,000. Thankfully the insured had the “Caring Card”, BCBS of Texas insurance. Billed chargesof more than $4,000 were discounted down to about $2,300.

Maybe the problem is regional – http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande

A brief 45 minute emergency room visit at a local Brownsville hospital for only $2,300. Sounds reasonable?

Molly Mulebriar and her team will submit their full detailed and documented report in a few days.

Could this be an example of egregious hospital cost gouging? Do PPO’s really negotiate good deals for us or do they owe a duty of loyalty with the providers they sign up? And, if what BCBS salesmen tell us, that they have the best pricing of any competitior in the market, how much would this emergency room bill had been under HealthSmart, Texas True Choice, Aetna, PHCS, United HealthCare, or any number of other PPO networks?

Could this be the reason the Brownsville Independent School District’s group health plan is costing the taxpayers over $40,000,000 per year? Does the BISD administration really know what kind of pricing Texas True Choice has negotiated with area providers upon the taxpayers behalf? Did the Brownsville medical community cut their costs to BISD through the Texas True Choice network as compared to the costs negotiated by HealthSmart the year before? (See http://blog.riskmanagers.us/?p=4143).

Editor’s Note: PPO’s negotiate provider pricing behind the curtain and will refuse to disclose the terms of their contracts with consumers. Medical providers will not disclose the contents of the contracts either. So no one other than the PPO networks and the providers know the true cost of health care – yet they expect consumers to pay without question. Almost all PPO contracts prohibit the consumer from auditing their medical bills. PPO contracts are Contracts of Adhesion. Brownsville ISD is spending over $40,000,000 per year on medical bills for their employees. This could be cut in half without reducing benefits. It has been done before and can be done in Brownsville. What is stopping the BISD from taking control over their raging healthc are costs?

The Cost Plus health care revolution in Texas continues to grow. Employers, searching for cost effective plans under the protections afforded through ERISA,  are experiencing plan savings of 40% and more without reducing benefits.

Five (5) Texas hospitals have elected the Cost Plus approach for their own group medical plans – a profound and unintended endorsement of the scheme. And, several large physician groups have initiated Cost Plus Plans for their employees as well.

Carrier representatives are worried. “Cost Plus will fail” is their message to their brokers. “Hospitals will shut Cost Plus Plans down!” they insist. Or, “We cant compete against it” some sob in abject mental anguish. Yet we find that more employee benefit brokers are embracing the concept, either as a defensive mechanism or as “true believers.”

We predict continued growth of the Cost Plus approach, along with significant changes to be endorsed by willing providers.

Cost Plus plans are managed by Group & Pension Administrators Inc. (www.gpatpa.com) in partnership with ELAP (www.elapinc.com).

Editor’s Note: Cost Plus is all about transparency. Will other TPA’s follow suit? Will other audit firms join the fray?

Just listed on the New York Stock Exchange. Experts recommend as a Buy. Large gains expected.

The company – one that looks set to reward you with a rapid 5,589% gain – is called First China Pharmaceutical Group (FCPG)… 

First China Pharma distributes and sells prescription drugs in the world’s most populated country… China… home to 1.3 billion people.

More specifically, First China Pharma is the leading regional pharmaceutical distributor providing approximately 5,000 products to more than 4,700 pharmacies, hospitals and clinics in China’s Yunnan Province.

RediClinic LLC is expanding the company’s partnership with H.E. Butt Grocery Co. (H-E-B) with plans to open three in-store clinics in San Antonio by the end of January.

Houston-based RediClinic already operates 21 clinics in Houston and Austin. In all, the company is planning to open 20 more clinics at H-E-B stores statewide.

The three local clinics will be operated in partnership with Methodist Healthcare System of San Antonio.

RediClinics are staffed by nurse practitioners and physician assistants who work with local physicians to diagnose, treat and prescribe medications for common illnesses.

For more information, visit this link.

www.rediclinic.com

Read more: RediClinic opening at select San Antonio H-E-B stores | San Antonio Business Journal

Editor’s Note: We suppose referrals will be where the money is made – Will Methodist Hospital be the beneficiary?