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?

 Subject: SPBA Email Alert: Health Reform: Today’s (December 13th)
Insights

SPBA Email Alert – December 13, 2010

Health Reform Insights
Personal candid insights from SPBA President Fred Hunt

Special Report: DISAPEARING  DOCTORS & HOSPITALS:
WHAT’S THE IMPACT ON EMPLOYERS & BENEFIT PLANS?

We are so busy focusing on the future of the payment side of health care,
that we forget to examine the necessary flip side…those who provide
medical care.  It’s scary, so let me devote most of this e-mail to that.

What if everyone has health coverage, but they can’t get a doctor in an
adequate or timely manner??  That’s the situation in many countries where
the government brags that it provides “coverage” to everyone.  (Lesson:
“Coverage” and “health care” are not synonyms.)  The signs are now clear
that PPACA has shifted us into high gear towards a mega doctor shortage (and
thus shortage of actual access to care).  Here’s the situation:

(1).  For years we have known that we would face a shortage of doctors as
the baby-boomer generation of doctors retired, and both old and young
doctors found it easier to be in non-clinical medical work, where new
profitable fields have opened, such as media expert-doctors, consultants,
authors, and entrepreneur & business activities that are not quite “medical”
and thus do not trigger the costs & hassles of being a practicing doctor..

(2).  An assortment of incentives have steered more doctors into specialty
practice…even though it has been known for decades that the greatest need
(and already a shortage) is in general practice family physicians.

(3).  Government continues to dodge handling nagging problems such as tort
reform and other things that add to the costs & hassles of being a
practicing doctor.

(4).  The effects of Congress’ 1997 health reform law create an SGR that
will impose draconian cuts (now approaching 25%) cuts on the payments (which
doctors already felt were too low) the government will make to doctors for
Medicare patients.  This comes at the same time as Medicare faces a glut of
new baby-boomers and PPACA will make almost half-a-Trillion dollar cut in
what government spends on Medicare.

(5).  Medicaid was already bleeding state & federal budgets, and often pays
doctors less than even Medicare.  PPACA will add about a 30% increase in
this money-losing category of medical practice.

(6).  All sorts of pressures point to cuts & pressure on doctor pricing in
the coming years for the other (not Medicare or Medicaid) patients, such as
pressures that will come from states to minimize the payments from their
state exchanges.  The whole medical community has relied on extensive
cost-shifting of losses from government programs made up by increases in
charges to private payers, who are getting tired of feeling ripped-off by
this practice.  So, cost-shifting opportunities will be severely shrunk.

(7).  There is a quadruple-whammy disconnect between the reality of the
structure of medical practices versus the  new government pressures.  The
majority of doctors today are in private practice, especially in small &
medium size practices.  However, everything seems to be trying to
marginalize that form of medical practice.  How?  >>Hospitals have pushed to
have more doctors as employees (and many young doctors prefer the
predictable hours & paycheck, and someone else taking care of the logistics
& insurance).  >>There has been a perception that bigger is better in
medicine so there is pressure for more groupings such as the Medical Home
and other combined concepts that make doctors feel like just a cog in a
machine.  >>Now, PPACA creates a strong push to have large Accountable Care
Organizations (ACOs, sort of a rebirth of the original HMO concept) as the
main provider of medical services.

NOTE:  Many of these same problems & pressures are also impacting the
changing future of hospitals, especially small & medium, and specialty
facilities.  So, that is why most of my forecasts later also apply to
hospitals & facilities.

The Physician Foundation has done a survey to gage the mood & plans of
doctors.  (Go to
www.PhysiciansFoundation.org<http://www.physicianfoundation.org/>).

>>60% of docs say that PPACA will lead them to close or significantly
restrict their practices to certain categories of patients (Read that to
mean only patients who generate profitable payments….not the ever-larger
Medicare & Medicaid population.)

>>Of the 60%, 93% said they would have to close or significantly cut back on
Medicaid patients, and 87% said they’d close or significantly restrict
Medicare patients.  This is presumably on top of the shortage of doctors who
will accept new Medicare & Medicaid patients today.

>>Besides natural retirements, 40% of doctors say they will drop out of
patient care in the next 1-3 years (note that their target time of year
three is 2014, when PPACA really kicks in).

>>59% say that PPACA will force them to spend less time with patients.
(Time with patient has always been an effective measure of “quality” of
care, so this is actually a decrease in quality.)

>>Over half of doctors said that PPACA will cause patient volumes to
increase, and 69% said they no longer have the time or resources to see
additional patients in their practices while still maintaining quality of
care.

>>In Washington DC (among politicians, AARP, and policy wonks…myself
include), it was assumed that SRG “doc fix” and impending fast-rising cuts
in payments for Medicare services was a desperate situation for doctors.  It
was, after all, the issue that got and kept the AMA as a “supporter” of
health reform.  However the Physicians Foundation survey reports that
doctors are about evenly divided about the impact importance of SRG (36%)
and health reform (34%) to their practices, and which will have the greatest
impact on their taxes.

FORECAST: My personal forecast is that doctors and all of us have been
feeling the pre-tremors, and by 2014 (assuming no dramatic change…meaning
more than just repealing PPACA), there will be a major earthquake of
doctors’ (and hospitals’) world, and much of what they and we patients have
known will no longer exist.  It will be a brave new world, and as I quoted
someone in my last e-mail, it will be a time when patients will need to
become accustomed to less-is-more when it comes to costly care & technology.
Mega is also presumed to be the mode of doctor & hospital combined medical
delivery.  Though the coordinated concept makes theoretical sense, I’m
betting that patients will equate mega with bureaucracy and lack of
continuity of personalized attention (which surveys have shown is how many
view many large doctor practices now).

Personal interaction may well shrink.  A person’s smart-phone will be their
doctor…to tell them the latest health news & reminders, have databases for
feedback & answers, and maybe even for transmitting check-up & diagnosis
data.

FUNNY DEJA VU:  This is a back-to-the-future scenario for me.  Because of
my involvement in health policy during the writing & passage of ERISA, in
1974, I was selected by a leading hospital to be a guinea pig for a (then)
cutting-edge full physical check-up without any humans.  Even the finger
prick for a blood sample was non-human.  Today’s technology would be able to
do much more, but the basic problem I had in 1974 will remain.  Many health
questions are not flat yes or no or multiple choice.  Machines don’t
understand nuances and can’t hear your tone or look into your eyes to
determine what you are truly trying to say about an ache or concern, or
notice that my hearing test headphones were too small, so let in outside
noise that drowned out the test noise, so I was rated as deaf in one ear.  I
did my best, the results were reviewed by top specialists at the hospital
(sounds like Medical Home or ACO concept), and the report arrived. The
report was far more detailed than normal physicals, but that precision and
the many bright red “abnormal” findings they triggered left me sure I would
soon be dead.  Fortunately, a neighbor had her med school books, and saw the
despondent panic in my eyes.  It turns out that many things cutting-edge
machines can measure (or misconstrue) vary wildly from testing to testing or
have no “normal”.  So, 36 years later (no thanks to the mechanical check-up)
I am alive and well.  So, medical care in a few years may be déjà vu for me.

IMPACT ON EMPLOYERS & BENEFIT PLANS:
The changes & shrinking in the medical provider arena will make employee
health benefits far more important than ever before.  They will not be
“fringe” benefits.  In the fast-approaching new world, an employee health
plan is a vital part of survival of the employer entities’ functions &
bottom-line.

Every employer knows that having a key computer or system out of service for
almost any time can be crippling.  That is why most employers have contracts
for very prompt diagnosis & repair of the problem to get the computer system
functioning again.  As all employers have trimmed staff levels in recent
years  and have thus less back-up, if a key person at any level is
out….especially out for a long undetermined time…it is just like having
the software system down for a long unknown amount of time.  In today’s
health system, a worker can get in to see a doctor and see whatever series
of specialists might be recommended  pretty quickly, and thus there is a
diagnosis…which gives both the employee and the employer some timeframe
for recovery, and recovery proceeds quickly  As the statistics & reasons
above show, this current situation of having enough doctors will be ending
in 1-3 years.

In countries where there are doctor and/or facility shortages (usually
because of government policy and/or the economics described above), that
initial appointment & diagnosis process can take months, and getting the
actual treatment can take more months.  (It took 18 months off the job for a
friend of mine in Canada.  That left the employer without the needed person
that long, and the worker’s reduced income during that period devastated
both family income and morale in the company.)

So, the new reality (especially since about 10 years from now, a labor
SHORTAGE is expected as most baby-boomers retire or die) is that employers
will be desperate to have a process (like their computer systems repair) to
get employees seen, diagnosed, and treated as soon as possible, and
self-funding will be the only way to custom-design the coverage for that
particular workforce.  It is pure survival economics.

So, smart employers (I’m including union-management multi-employer plans) of
all kinds will want to keep and maximize their employee health plan.
Wellness programs and even on-site of shared clinics will spread.

You may ask if employers can afford to maintain their employee health plan.
Besides the inestimable survival factors noted above, it will be very
expensive to not have an employee health plan.  There is a penalty fee if
you don’t sponsor a plan.  It’s not bad now, but will rise and rise.
However, the biggest cost factor is that you don’t just send employees off
to buy their own coverage.  You will be expected to make the big boost to
their paychecks to pay for not only the cost of the coverage elsewhere…but
they (and you) will also have the payroll taxes for that big boost in income
which will also raise their IRS & state/local income taxes and any other
items tied to pay level.  Employees are going to expect you to make them
whole for ALL their extra costs because you do not have a health plan.
Again, it is simply human psychology & economics.  I think it will cost more
than working with a TPA to design & administer a customized prompt employee
health plan.

So, let me end with one of the first thoughts.  In the system that is taking
shape (and can not be stopped), having health “coverage” or “insurance” is a
very different thing than getting health “care” & services.

Fred

RICHMOND, Va. – A federal judge declared a key provision of the Obama administration’s health care law unconstitutional Monday, siding with Virginia’s attorney general in a dispute that both sides agree will ultimately be decided by the U.S. Supreme Court.

U.S. District Judge Henry E. Hudson is the first federal judge to strike down the law, which has been upheld by two other federal judges in Virginia and Michigan. Several other lawsuits have been dismissed and others are pending, including one filed by 20 other states in Florida.

Hudson rejected the government’s argument that it has the power under the Constitution to require individuals to buy health insurance, a provision that was set to take effect in 2014.

“Of course, the same reasoning could apply to transportation, housing or nutritional decisions,” Hudson wrote. “This broad definition of the economic activity subject to congressional regulation lacks logical limitation” and is unsupported by previous legal cases around the Commerce Clause of the Constitution.

There was no immediate comment from the White House.

The lawsuit was filed by Virginia Republican Attorney General Kenneth Cuccinelli in defense of a new state law that prohibits the government from forcing state residents to buy health insurance. The key issue was his claim that the federal law’s requirement that citizens buy health insurance or pay a penalty is unconstitutional.

“This won’t be the final round, as this will ultimately be decided by the Supreme Court, but today is a critical milestone in the protection of the Constitution,” Cuccinelli said in a statement after the ruling.

Hudson, a Republican appointed by President George W. Bush, sounded sympathetic to the state’s case when he heard oral arguments in October, and the White House expected to lose this round.

Administration officials told reporters last week that a negative ruling would have virtually no impact on the law’s implementation, noting that its two major provisions — the coverage mandate and the creation of new insurance markets — don’t take effect until 2014.

The central issue in Virginia’s lawsuit was whether the federal government has the power under the constitution to impose the insurance requirement. The Justice Department said the mandate is a proper exercise of the government’s authority under the Commerce Clause.

Cuccinelli argued that while the government can regulate economic activity that substantially affects interstate commerce, the decision not to buy insurance amounts to economic inactivity that is beyond the government’s reach.

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

Hospitals are still making money, especially in North Texas.

The recession may have threatened to put the nation’s hospitals on life support, but they managed to post a 5 percent profit margin in 2009.

That ties their 25-year average profit margin, according to an analysis from Modern Healthcare magazine.

Last year, the nation’s hospitals earned $34.4 billion in profit on $691 billion in net revenue.

The report, based on data from the American Hospital Association, said hospitals’ efforts to control expenses more than made up for their sluggish patient revenue. Hospitals slowed the expense growth to 5 percent, compared with the 25-year average of 7 percent.

Few regions exemplify hospital financial health like North Texas. Some of the nation’s most profitable hospitals are based here.

Baylor Medical Center at Frisco has the highest operating margin among full-service hospitals in North Texas, with 29 percent, according to the American Hospital Directory.

A hospital’s operating margin is its operating income divided by revenue. It is an important measuring stick for ranking efficiency among competitors.

A higher operating margin tends to indicate a lower cost of running a hospital. It means the hospital can deliver health care to patients more cheaply than competitors and still make money.

However, high operating margins also are used when deciding where to place blame for health care cost increases.

Read more: Prime Health expanding to San Antonio | San Antonio Business Journal

(MILWAUKEE, WI) Published findings from a new report released today by the independent pharmacy benefit manager, Restat, found that employers could experience significant annual cost savings by adopting a “preferred” pharmacy benefit strategy. The report, “The Value of Alternative Pharmacy Networks and Pass-Through Pricing,” was researched and written by the internationally recognized consulting firm of Milliman, Inc. and outlines for the first time actuarial estimates of prescription drugs’ retail cost components.  The report can be found on http://align.restat.com/white-paper/.

“These findings show that significant savings could be available to employers willing to adopt a strategy that cuts the fat from the traditional pharmacy benefit model,” said David Kwasny, Restat president.  “This new approach also helps eliminate the confusion and misunderstanding some employers may have over a pharmacy benefit system that has become much more complicated in recent years.”

 Milliman’s comprehensive analysis broke apart the traditional pharmacy benefit model studying the key cost and distribution components among drug manufacturers, wholesalers, drug stores and pharmacy benefit managers (PBMs). The study, commissioned by Restat, sought to determine if there were potential cost-saving benefits to employers adopting a preferred pharmacy model that reduces drug costs and eliminates price spreads.

According to Kwasny, Milliman’s findings demonstrate the science behind Restat’s Align model – a strategic approach to pharmacy benefit design that tears a page out of the Preferred Provider Organization (PPO) model where network hospitals or physicians accept a reduced fee to be included as a favored healthcare provider.  Pharmacies in a preferred network offer lower drug prices and reduced dispensing fees to attract customers from competing drug stores and increase foot traffic from members enrolled in the employer’s pharmacy benefit plan.        

Milliman’s findings show that, depending on the benefit design, an employer’s overall costs could be reduced by up to 13 percent by utilizing a limited, preferred pharmacy benefit design and pass-through pricing model rather than a traditional model that includes most retail pharmacies.  For example, the study showed that by adopting a closed network, where coverage is only through network pharmacies, an employer with approximately 10,000 members could save up to $845,000 annually. Additional savings could also be earned with plan changes that encourage member use of generic drugs over branded drugs.

While the Milliman report did not specifically study Restat or Align, Kwasny said “Milliman’s findings reinforce our own client experience,” said Kwasny.

“By creating plans that use preferred pharmacy networks and favor generic drugs, Restat has found that a company with 5,000-6,500 employees can save up to $2 million annually,” Kwasny added.

In addition to lower drug pricing, Kwasny said reduced program costs are achieved with transparent PBM pricing. The PBM charges an explicit administrative fee for drug administration services.  It collects no revenue from rebates or “spread” – the difference between the price the pharmacy collects from the PBM and the price the PBM charges employers, which is a common feature of traditional PBM contracts.

The study was authored by a team of actuaries led by Bruce Pyenson, FSA, MAAA, from Milliman’s New York office.  The report analyzed each component of pharmaceutical drug spending – starting from the manufacturer all the way to the employer and use by consumers.  Milliman’s findings help explain why some pharmacies and PBMs could offer lower prices on prescription drugs and how an employer could obtain significantly lower costs by using preferred pharmacies with pricing that goes directly to the network member. 

 According to Kwasny, the preferred pharmacy benefit network model is “clearly a better approach to managing prescription benefits, and one that offers greater transparency in services offered by PBMs by delivering savings directly from the pharmacy to the employer.” 

“Our goal is to simplify the purchase and use of healthcare by providing unbiased benefits advice free of any conflict of interest,” Kwasny said. 

ABOUT RESTAT:  A member of the Dohmen family of companies, Restat simplifies the purchase and use of healthcare services through independent health benefits management. As the largest independent PBM, Restat has no ownership ties to drug manufacturers or distribution channels, making it uniquely positioned to provide customers with unbiased benefit management solutions. Today, more than 4,200 companies, ranging in size from the Fortune 50 to small managed care organizations rely on Restat to manage the prescription benefit for more than12.2 million people nationwide. To learn more, visit www.restat.com or call 800.926.5858.

 ABOUT MILLIMAN: Milliman is among the world’s largest independent actuarial and consulting firms. Founded in 1947 as Milliman & Robertson, the company currently has 54 offices in key locations worldwide. Milliman employs over 2,400 people. The firm has consulting practices in healthcare, employee benefits, property & casualty insurance, life insurance and financial services. Milliman serves the full spectrum of business, financial, government, union, education and nonprofit originations. For further information, visit www.milliman.com.

Editor’s Note:  Here you go. Makes sense. HEB and others are pushing this concept; “make us your only Rx source and we will give you a heck of a deal.” This is exactly the same thing we are doing with cost-plus – steering patients to the most cost effective providers. Rx pricing differentials between pharmacies can be significant. And with Rx costs going through the roof this year (why?) some groups are paying as much as 25% of their total spend on drugs. Time to do something about it.

You have been invited to bid on the following opportunity by the buyer.
In order to respond to this bid opportunity, you will first need to register with SISD eBid System.
Once your registration has been approved, you will be able to login and respond to the bid opportunity.

To begin the registration process, please click the following link or paste the link into your web browser:

    https://ebid.sisd.net/VendorRegistration.aspx?vcid=27&iid=43B42A5E-16D9-4ABB-A84C-0656A49C731E

Bid Opportunity Information:
    Bid Number: 199-1217-E1149
    Bid Title: Employee Benefit Consulting Services
    Bid Notes: To provide Socorro Independent School DIstrict with Employee Benefit Consulting Services on an as needed basis.
    Issue Date: 12/6/2010 11:42:34 AM Mountain
    Close Date: 12/17/2010 9:00:00 AM Mountain

If you do not wish to respond to this bid, you may choose not to register.

If you have questions about this bid opportunity or the system, please contact Purchasing.
    Phone: (915) 937-0164
    Fax: (915) 851-7577
    E-mail: ebid@sisd.net

 Molly Mulebriar reports she has obtained a copy of a BCBS hospital contract. She wants $1 million for it, and will accept cash only. She is willing to consider other offers, and suggests that a consortium of interested actuaries pool their resources to make an offer to purchase.

As a sign of good faith, Mulebriar has brokered an agreement with the Pope to act as facilitator of the sales transaction. The BCBS Hospital Contract, herein referred to as The Holy Graile, is under guard at the Vatican. Independent experts have verified authenticity.

In lieu of selling The Holy Graile, Mulebriar has challenged us to publish the document on this blog. However, she insists, to be fair, we publish Aetna, Humana, Texas True Choice,  and HealthSmart PPO contracts as well.

We are meeting with Mulebriar next week in Moose Breath Montana to discuss terms.

Trend is a fancy word for medical inflation. We all know that health care costs go up every year. We expect our health insurance rates to increase to cover the higher health care costs. Makes sense.

But, who calculates trend? Carriers do, and make sure you know it. Trend, they pontificate, is the evil ingrediant in ever rising health care costs. More than advanced technology, aging population, new government mandates, trend is why your health care costs go up every year they reason.

Recently we looked at a Humana and a Cigna renewal on two different groups. Both used a trend factor of about 14%. What that means is that both carriers project that health care costs are going to go up next year by 14% and they offered renewal rates accordingly.

Other carriers are using just about the same number.

But, a recent report released in November by New York based Mercer L.L.C. shows that trend is 6.9%, up from 5.5% last year (Business Insurance, November 22, 2010).

If Mercer is right, then how do carriers come up with a figure double that?

Or do the carriers know something we dont know? Do their PPO contracts contain escalator clauses which guarantees their providers a pay raise year after year? Do PPO escalator clauses drive up health care costs?

Editor’s Note: We know that a few actuaries visit our site on occassion. We welcome their response to this post. Leave your comment/s at Riskmanager@sbcglobal.net

The blog posting below this one confirms what Jeff Seiler has been saying for years. Confirmation by a major hospital system adds to Seiler’s reputation as one of the leading health care consultants in the United States. 

A visit to his website, www.ssbenefits.net is a must for anyone interested in learning The Truth that no one else (except us) wants you to know.

Read his masterpiece article, “The Truth (As We See It) About Blue Cross PPO Discounts” here: http://www.ssbenefits.net/THE%20TRUTH%20ABOUT%20THE%20BLUES.htm

NEW as of 3/2010- this is the Blues new disclosure, which basically proves everything in “The Truth (as we see it) about the Blues PPO Discounts” article above.  Blue Cross 5500 Disclosure Proves The Truth   We’ll bet your Blues broker never read it or told you. We’ve highlighted a few areas for you to review.

 Texas Health Resources BCBS 

Editor’s Note: Molly Mulebriar reports more information availble soon.

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

Or do they?

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

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

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

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

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

This is upside down.

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

Seems the Feds can’t get their act together.

http://www.valleycentral.com/news/story.aspx?id=547346

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

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

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

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

For more information, type in “Olivarez” in the search box on this blog to read prior postings. Also see http://www.valleycentral.com/news/story.aspx?id=543677.

Editor’s Note: The Texas Department of Insurance website shows Olivarez recently renewed his insurance license – https://www.texasonline.state.tx.us/NASApp/tdi/TdiARManager

Texas Administrative Code – Licensing of Convicted Felons – http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=T&app=9&p_dir=P&p_rloc=148044&p_tloc=&p_ploc=1&pg=2&p_tac=&ti=28&pt=1&ch=1&rl=503

Admitted felon Arnulfo Olivarez currently represents the following insurance companies:

Read about “The Rest of The Story” here: http://www.brownsvilleherald.com/news/official-85637-board-rep.html

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

http://www.businessinsurance.com/apps/pbcs.dll/article?AID=/20101122/NEWS01/101129994

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

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

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

For more information contact RiskManager@sbcglobal.net .

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

Getting To Know TribalCARE

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

Why Tribes?

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

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

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

Which Tribes?

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

TribalCARE, Powered by HealthSmart, Offers:

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

How It Works

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

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

TribalCARE Benefits

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

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

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

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

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

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

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

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

November 12, 2010

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

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

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

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

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

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

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

Editor’s Note: Article obtained from www.galen.org

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

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

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

 For fact sheets on EBSA’s civil and criminal enforcement programs, see www.dol.gov/ebsa. To view the employers facing enforcement actions visit www.dol.gov/ebsa/newsroom/ECI/main.html.

Indicted contractors not new to Valley scandals

November 16, 2010

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

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

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

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

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

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

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

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

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

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

(Reporting by Susan Heavey; editing by Andre Grenon)

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

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

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

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

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

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

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

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

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

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

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

Health Reform is Entrenched, But …

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

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

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

Health Reform is Still Evolving

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

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

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

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

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

Prediction:  Health Reform Boost TPA Business

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

Employer Defection?

Health reform also deals employers a new hand.

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

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

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

Sponsoring a Heath Benefits Plan As Important As Any Company Decision

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

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

TPA Future Optimistic

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

TPAs Must be Pro-Active

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

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

About SPBA

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

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

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

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

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

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

http://www.youtube.com/watch?v=vKI9be55N00

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

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

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

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

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

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

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

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

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

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

 Dr. Alan M. Preston

Alan M. Preston, MHA, Sc.D.

   Healthcare Policy, Biostatistics, Epidemiology

Editor’s Note: Dr. Preston can be reach via email at Alan@HealthPolicy.co .

By Susan Heavey
November 12, 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

‘LESS BARK’

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

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

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

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

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

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

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

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

DRUGMAKERS CAN’T WAIT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Comment:  

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

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

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

Dr. Alan M. Preston

   Alan M. Preston, MHA, Sc.D.

   Healthcare Policy, Biostatistics, Epidemiology

  

Case Against Blue Cross Shows Difficulty of Lowering Health Care Costs

By Alison Young, USA TODAY

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

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

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

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

Blue Cross denies trying to hurt TheraMatrix’s business.

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

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

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

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

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

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

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

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

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

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

A battle over business

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

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

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

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

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

Ford kept TheraMatrix; the program began in August 2005.

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

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

None ended Ford’s discounts.

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

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

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

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

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

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

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

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

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

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

The move outraged Ford officials.

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

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

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

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

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

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

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

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

Whitton says that’s when TheraMatrix sued Blue Cross.

‘You get the care that you need’

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

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

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

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

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

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

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

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

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

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

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

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

My thoughts as always.  Thank you,

 Dr. Alan M. Preston

Alan M. Preston, MHA, Sc.D.

Healthcare Policy, Biostatistics, Epidemiology

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

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

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

The Effects of ObamaCare

By Lisa Cummings

It Does What?

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

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

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

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

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

Coverage for all with capped premiums

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

General provisions of ObamaCare, generally starting in 2014

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

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

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

You can purchase health insurance more easily.

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

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

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

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

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

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

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

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

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

• Adds new taxation on capital gains, including a new 3.8% tax on the sale of your home (2013)

• Mandates auto-enrollment in long-term care at a cost of $123 per month for everyone (the CLASS Act), requiring an affirmative opt-out if you don’t wish to be covered (as soon as HHS can determine how to implement).[5] This section is so outrageous, Sen. Kent Conrad (D-ND), Senate Budget Committee chairman, called it “a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of.”[6] (Yes, Sen. Conrad voted for ObamaCare and the self-described Ponzi scheme.)

• Adds a medical device tax of 2.9% on everything from CT scanners to surgical scissors, to be passed along to health-care consumers (2013)[7]

• Enhances the Nanny State: restaurant chains will have to post caloric content next to prices on the menu, and nutritional information must be posted on the outside of all vending machines (2011).[8]

• Triggers loss of insurance coverage by large numbers of lower-paid employees, starting in 2011

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

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

The Pork Included in ObamaCare

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

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

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

Funding of asbestos clean-up in Montana[14]

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

Unintended Consequences of Health Care Reform

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Employers’ Decision to Keep or End Retiree Medical Plans

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

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

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

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

By 2020, ObamaCare will:

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

Raise the national debt by more than $753 billion

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

Employers

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

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

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

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

Individuals

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

Doctors[29]

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

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

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

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

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

States[32]

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

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

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

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

Retirees[36]

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

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

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

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

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

Seniors will pay higher taxes as well.

Taxpayers[38]

Three major tax increases:

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

Numerous additional taxes:[42]

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

What’s Next?

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

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

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

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

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

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

Dental risk is not hard to evaluate and is predictibile.

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

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

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

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

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

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

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

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

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

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

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

Olivarez faces up to 20 years in prision and fines.

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

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

 Admitted Felon – Half Guilty Half Pregnant Olivarez