A grass roots organization is working hard to convince Texas Governor Rick Perry to take a stand against the Communist controlled Congress in Washington – http://www.notintexas.org/

Life insurance represents a valuable fi nancial solution to the various needs of businesses and families. Over time, however, these needs change. Loans are repaid; key executives retire; estates become smaller; businesses are sold; estate taxes are reduced — or better yet, no longer exist. Or, with interest rates down, a policy may just be too expensive.

According to a leading actuarial consulting firm, 88% of all universal life and 85% of all term policies never result in a death claim. In the past, these policies were surrendered to the insurer for their cash value, or worse, allowed to lapse for nothing at all. Life settlements present a compelling alternative. By allowing policyowners to access the market value of their policies, life settlements generate significantly more than surrender value for unneeded policies. And this value can create enormous opportunities for policyowners and advisors alike.

A life settlement can be arranged on any type of life insurance policy, including term life. Face amounts as low as $100,000 are candidates, with life expectancy of 21 years or less. If you have a policy that you no longer need, or know of someone who is about to let their life insurance policy lapse, contact RiskManager@sbcglobal.net for information on how to convert that life insurance policy into cash.

Does spread pricing get you down? Are you really getting 100% of the rebates? Maybe you should consider starting your own PBM – Fairview Health Systems did just that. They formed their own PBM –  ClearScript is a business of Fairview Pharmacy Services LLC, which is a wholly-owned subsidiary of  Fairview Health Services.  In their first year they saved millions of dollars for the 18,000 employees of Fairview Health Systems – www.clearscript.org.

We wrote a local talk show host, offering  our views on our current health care system. Below is his response:

Free Markets do not produce solutions they only produce profits. The Free Market of Doctors, Health Insurers etc have created a “class system” in America with regards to healthcare. Over 50 under 65, laid off, got health problems…..tough Born with a disease or disability, tough. Injured from breathing bad air, water or unsafe working conditions. Tough. The wonderful COB RA plan costs more for a family of four a month than 40% of the unemployment paid in states in the USA . Healthcare is a “mafia” who controls the costs, controls the access and controls the lives of all of us. These peoples “death panel” meets everyday, when they do not get cancer screenings and life saving drugs etc….

 I am not a fan of Obamacare, but the free market is a myth. Healthcare costs have gone up 120% in the last nine years. Can you explain that? I appreciate your comments, but what program has the free market offered to fix the current healthcare mess in this country?

 Colonel Ray       
710 KURV News Talk Radio
Listen Online:  www.kurv.com
On Air Call-In   800-580-8255

Editor’s Note: This was our response: 

What good is an insurance offer (proposal) upon which you made the decision to purchase, if you cannot compare it to the governing contract to be placed in force? 

Answer:

A. Worthless – contract supercedes proposal

B. Binding – proposal supercedes contract

C. Dunno

Editor’s Note: Unfortunately, this phenomenon is becoming more prevalent with political subdivisions who bid out their self-funded employee welfare plans. Proposals are received through contractors (example – third party administrator)  who in turn sub-contracts out various components of the plan (example – pharmacy benefit manager). The proposals submitted by the contractor on behalf of the sub-contractor are not binding upon the political subdivision. Once the proposal is approved, the contract is executed between the contractor and the sub-contractor. The political subdivision thus becomes a third party beneficiary only, and not a party to the contract. Therefore, the contract can be deemed “proprietary” to the contractor and the sub-contractor and the political subdivison will not have the ability to compare the actual contract to the proposal upon which they made the decison to purchase. And, it has been our experience that when you cannot review a contract, that means you are usually paying more than you should.

Gov. Rick Perry, raising the specter of a showdown with the Obama administration, has suggested in numerous interviews that he would consider invoking states’ rights protections under the 10th Amendment to resist the president’s healthcare plan, which he  has said would be “disastrous” for Texas.

Perry has said his first hope is that Congress will defeat the plan.  But should it pass, Perry has predicted that Texas and a “number” of states might resist the federal health mandate.

“I think you’ll hear states and governors standing up and saying ‘no’ to this type of encroachment on the states with their healthcare,” Perry said. “So my hope is that we never have to have that stand-up. But I’m certainly willing and ready for the fight if this administration continues to try to force their very expansive government philosophy down our collective throats.”

Editor’s Note: The mainstream media is not reporting efforts underway by several states to explore alternatives to Obamacare.

“Whether health reform passes or not, there will be some lasting effects that will help. Health Reform has raised awareness that all Americans are not equal in what they get charged for medical services, and sometimes the range of difference is shocking. The recent system of phony discounts that had the effect of propping up inflated health charges is starting to crumble. ”

“If there is a Public Option, especially which would have a negotiated payment rate for providers, any Public Option rate will quickly be adopted by the private sector as the new Usual & Customary standard payment schedule for everyone. Unlike Medicare, which was always seen as a discounted program, a negotiated Public Option rate would have the credibility of the federal government standard of a fair acceptable rate for regular people. Would providers object and try to balance bill? Perhaps at first, but telling a patient that the amount negotiated in good faith between providers and the government is a bogus rate is awkward. This will not happen overnight, but the public and the politicians are recognizing that there is some pricing funny business going on.”

– Fred Hunt, President, Society of Professional Benefit Administrators

Editor’s Note: Preferred Provider Networks will become extinct. Discounts based on inflated and obnoxiously high billed charges are a joke. The Disco Discount Generation, like America’s Greatest Generation, will pass into history as a brief footnote.

For fiscal year ending August 31, 2009, claims to contributions (loss ratio) is approximately 95%. Taking into account cost of administration, the net results for the fund is (-) $69,036,559. With established reserves, the net balance of the fund is estimated to be $ 486,766,302. 

Claim costs pmpy has increased from $3,361 to $3,527 over the prior year, representing a +4.5%.

We expect a modest rate increase to the fund. This should be announced in March 2010 by the TRS ActiveCare Board of Directors.

The report of the Task Force on Access to Health Care in Texas: Challenges of the Uninsured and Underinsured was issued April 17, 2006. The Task Force represented a nonpartisan group sponsored by all 10 of the major academic health institutions in Texas, as well as representatives from large and small employers, hospitals, health policy experts and community and business leaders. This Task Force was comprised of some really smart people, much smarter than most of us earthlings.

The Task Force collected data, identified and assessed the magnitute of the problem of the uninsured in Texas, and made recommendations for consideration by policymakers (career politicians).

Here are their findings: A lot of folks in Texas are unhealthy and uninsured.  Health insurance is costly.

Their recommendations: Garner more federal monies (tax), implement a 3% punishment fee  (tax) to all hospitals and surgical centers, give preference in awarding government contracts to those contractors who show proof of health insurance, adopt punishment (tax) policies that “encourage” employers to provide health insurance for their employees, adopt a “share subsidy” (tax) for small employers, mandate 60 minutes a day for exercise for Texas public school children, expand  (taxes) the School Breakfast Program, increase “investment” (tax) in the education and training of health professionals, adequately invest (more taxes) in public health programs, among numerous other recommendations along the same lines, i.e, “Throw Money At The Problem And Everything Will Be Just Fine.” Taxes solves problems” seems to be the universal answer these days.

We read this Code Red Report three times. Surely we were missing something we thought. Unable to reconcile this report with our inner sense of values instilled in us by members of America’s Greatest Generation (our parents), we appointed Molly Mulebriar to head our own Task Force to study the issues addressed in the Code Red Report. Here are our findings:

Our Findings: A lot of folks in Texas are unhealthy and uninsured. Health insurance is costly.

Our Recommendations: No need to inform Texans that many of them are unhealthy and uninsured and health insurance is costly – they already have figured that out on their own. No need to  recommend that they do someting about it on their own – they are generally smart enough to have figured that out too. For example, they know that when they visit the grocery store, they should buy “good stuff” instead of the “bad stuff.”  And they know that If you really want health insurance, you can buy it, guaranteed in Texas, if you are willing to give up your cell phone, Saturday nights out on the town, and those expensive vacations to Tahiti.

If the goverment wants everyone to have health insurance, why dont they mandate that for everyone who shows proof of health insurance, the government will pay for their cell phone, Saturday nights out on the town, and at least one annual vacation to Tahiti – after all, we are all entitled to that arn’t we?

A free and unfettered market solves problems – government intervention generally exaserbates them

Molly Mulebriar summed up the problem by saying “If costs are high, offer to pay less and find someone who will accept it. This is called  a ‘Free Market Economy’ which has worked so well for the past 200+ years in this country.”  

Molly Mulebriar – American Hero

Code Red Report here:  code_red_synopsis

A compromised announced this morning by members of the United States Senate regarding a “government option” as part of the health care reform bill, stipulates that any insurer can offer a plan through exchanges, however “the plan itself would have to be non-profit.” That leaves two  key players; Kaiser and Blue Cross.  For profit carriers like Aetna and United HealthCare would not be allowed to compete for business through the exchanges.

http://news.yahoo.com/s/ap/20091208/ap_on_bi_ge/us_health_care_overhaul

Editor’s Note: We expect easy passage of this bill – pundits report there are 60 votes “in the bag”.  A vote may take place as soon as next week.

A lawsuit filed in October 2007 by Oakland County against Blue Cross & Blue Shield of Michigan may have a wide ranging impact on PPO contracts. In 2006 Blue Cross presented their client with a new administrative contract on renewal. What caught the attention of Oakland County officials was the following language:

“A portion of your hospital savings has been retained by BCBSM to cover costs associated with the establishment, management and maintenence of BCBSM’s participating hospital, physician and other health care provider networks. The ASC Access Fee also covers any subsidies, surcharges and contributions to reserves order by the State Insurance Commissioner as authorized pursuant to P.A. 350.”

This was new language in the contract and was not in previous contracts in prior years. According to the lawsuit, “Since this proposed contract provision was significantly different than prior proposals, Plaintiff requested from Defendent an explanation regarding the new language and especially the ASC Access Fee. Among other things, Defendent responded, in essence, that the ASC Access Fee had been charged to Plaintiff for many years, but was not disclosed. Defendent stated that it “retains a portion of the provider reimbursement savings that it achieves for it’s group.” In other words, when Defendent received a discount on a bill from a hospital, it did not pass the entire discount on to Plaintiff.”

Oakland County estimates that this alleged “hidden fee” amounted to about 4% . In researching their claims since the initial inception of the BCBS health plan for their employees, Oakland County projects that the 4% fee amounts of over $10,000,000, a sum for which they are now seeking reimbursement.

http://blog.mlive.com/oak_business_review/2008/03/oakland_county_sues_blue_cross.html

Editor’s Note: In reviewing a BCBS hospital contract, we noticed the ASC terminology within the contract. Yet, how many of our readers have ever seen a BCBS hospital contract? We would guess none. (It took us 7 months to track one down – an effort well worth the time). For a copy of the original pleading, email Riskmanager@sbcglobal.net . The outcome of this lawsuit may have wide ranging implications for all PPO networks.

Public requests for information surrounding the recent BISD award of a $40 million insurance contract have been met with resistance by the district. They have appealed to the Texas Attorney General to deny release of information.

A recent letter from the Attorney General to the BISD dated December 2, 2009 is encouraging.  The BISD was advised that they must release certain information that has been requested. This is good news for the taxpayers of Brownsville.

It is all about accountability and transparency. The public has a right to know how their taxes are spent. Public officials need to be held accountable. When asked to review the accuracy of a $371,000 apparent descrepancy, one would expect a straight forward and expeditious response. After three months, a cogent response remains elusive.

Editor’s Note: It has been our position that when a third party beneficiary of a contract is not allowed to see that contract, it usually means they are paying more than they should.

http://www.myharlingennews.com/?p=5436

Editor’s Note: This is just one more guilty plea of a public official in the Lower Rio Grande Valley where corruption runs rampant and unchecked. It is no wonder that many insurance companies have Red Lined the Valley. Unfortunately, those that do compete for business and are successful, are viewed by many to be corrupt as well. After all, is there not any other way to obtain lucrative insurance contracts in the Valley other than through mordida?

http://www2.wholefoodsmarket.com/blogs/jmackey/

Health Care Strategies for Texas Political Subdivisions

Currently, the City of XXXXXXXXXX has a Cafeteria Plan through Seciton 125 of the Internal Revenue Code. It is my understanding that the Plan Administrator performs certain services at no charge to the City in lieu of selling insurance policies to the employees. Therefore, the role of the administrator and vendor of insurance products are combined.

Senate Bill 273 addresses concerns regarding the role of the administrator and vendor of products. While this bill refers to Texas public school districts, I believe it may well apply to any employer group in Texas that offers a Cafeteria Plan. Section 9, subsections 4,5.6 address the issues in question.

In my discussions with the Texas Department of Insurance, it is apparent that the acts of “enroller” versus “marketer” must be separate and distinct. An enroller who is working for the administrator who has contracted with the employer, has the advantage of promoting his products at the time of enrollment since he has the enrollee in a captive environment. Additionally, the “enroller” by virture of the function he is contracted to perform, has privileged information about the enrollee, (such as amounts and types of policies or contributions the enrollee has made, W2 information, salary and hourly information), that gives the enroller an unfair advantage.

The functions of the administrator are separate from the acts of an agent. These lines begin to fade during this process to the unsuspecting consumer. In my opinion, administrators must separate the functions of the “enroller” from those of the “marketer.”

It is my understanding that when a court does interpret a statute, Seciton 321.005, Government Code, it requires it to ascertain the legislature’s intent. Further, it is my understanding that when construing a statutory term, Section 312.002, Government Code, requires words to be “given ordinary meaning.” The ordinary meaning of the work “benefit” includes “advantage” and “useful aid.” The free or reduced cost of Cafeteria Plan administration, I believe, provides a financial advantage and useful assistance to the City of XXXXXXXXXX, and therefore a “benefit.”

It is my opinion that to accept a free or reduced fee cost plan for Cafeteria Plan administration give the appearance or endorsement for the insurance products that are required to be offered (sold) to participants of the plan, thus giving one company preferential treatment over another. The offer of a free administration in return for the soliciatation of insurance policies may be a form of rebating as defined by the Texas Insurance Code.

Since the City of XXXXXXXXX is currently requesting bids for their health insurance, I believe that it would be constructive to review and bid our the Cafeteria Plan Administration contract to incorporate some of the issues and concerns expressed herein. I believe that it would be beneficiall to the City of XXXXXXXXXXXX to align the employee health insurance program concurrent with the Cafeteria Plan Fiscal Year. There are distinct advantages to doing so and could be accomplished by bidding out administration now.

In conjunction with bidding out the Cafeteria Plan Administration, I recommend that the City of XXXXXXXXXXX also bid out the insurance products to be offered through the Plan. This would mark a clear delineation between the enroller and the marketer. This would also give the City of XXXXXXXXXXX the advantage of competitively bidding out the insurance products, rather than be limited to the products offered and sold by the Plan Administrator. The end result may be better coverage at lower costs to the employee and eligible dependents.

I hope this opinion and recommendation answers your questions. If I can be of any further assistance, or provide additional information as needed, please do not hesitate to call me.

Editor’s Note: This letter was completely ignored by our client. They continued their “free” Cafeteria Plan Administration with a local insurance agent. This group of approximately 800 employees generates approximately $125,000 in annual insurance commissions on products sold through the city’s Cafeteria Plan.

This generic pharmaceutical drug manufacturer has been around for 25 years  and not only leads this foreign nation’s domestic market – it is a major player throughout the world, including the United States.  This pharmaceutical manufacturer has developed a new drug for diabetes and is awaiting FDA approval. Approval is expected. Estimated market share in the United States will be 26%, earning enormous profits for this foreign based manufacturer.

http://www.sovereignsociety.com/Portals/0/landing/FullPromo_EDSIKB12.html

HealthSmart Holdings, Inc. announced that it has successfully completed a recapitalization with Silver Point Capital, L.P. and the Company’s other lenders.

Silver Point Capital, L.P. is a private investment firm based in Greenwich, Connecticut. The firm manages hedge funds for its clients. It invests in the public equity, fixed income, and hedging markets of the United States. The firm primarily invests in securities of distressed, large-cap, and Mid-cap companies; bank debts; bonds; and trade claims. It specializes in credit analysis and diversified credit-related investments.

We have all been hearing about the health care debate in Congress from the media these days. But do any of us really understand the vast implications in store for us should the House and/or Senate version become reality?

Go here for a side-by-side comparison of the House and Senate Bills.’ http://www.kff.org/healthreform/upload/housesenatebill_final.pdf

November 2009

Dear Producer:

Re: Health Care Service Corporation’s Code of Business Ethics and Conduct

Health Care Service Corporation (HCSC) and its subsidiaries are committed to the highest standards of business ethics and integrity as well as compliance with all applicable laws and regulations governing its business operations. HCSC requires that all employees adhere to these standards. Doing so will enhance and reinforce the Company’s status as a responsible corporate citizen and will maintain the confidence of the Company’s employees, customers, providers and the public in its honesty and integrity.

HCSC adopted a Code of Business Ethics and Conduct (the “Code”) to further its commitment to a culture that promotes legal and ethical behavior. The Code defines HCSC’s values and behavioral expectations for every employee of the Company. We place the utmost importance on the observance of these principles. Compliance with the Code is a condition of employment for every HCSC employee.

HCSC’s excellent reputation depends not only on the conduct of its employees but also on the honesty, integrity and good judgement of the people and organizations with whom we do business. We value the relationships we have with our producers. We realize that these relationships are built on trust and cooperation and many have developed over years of working together. We must always maintain the highest standards of integrity and objectivity in these working relationships and we will not conduct business with anyone who does not operate with integrity or who compromises our Company’s values and ethical standards or encourages our employees to do so.

HCSC’s Code of Business Ethics and Conduct is available on our web sites at www.bcbsil.com, www.bcbsnm.com, www.bcbsok.com and www.bcbstx.com. Please share this information with your employees and agents who do business with HCSC. Of particular importance are the integrity standards related to conflict of interest, fair competition, confidential information, accuracy of records and gifts and gratuities and I ask that you review these standards carefully. Your understanding and support of our Code will allow us to work effectively together and with the highest level of integrity.

As a producer selling our products, you must bring forth any concerns of suspected health care fraud or other questionable practices. The toll-free Integrity Hotline number is 1-877-272-9741. Persons reporting such information need not identify themselves. The Hotline is available twenty-four (24) hours a day, seven (7) days a week.

If you have any questions regarding HCSC’s Code of Business Ethics and Conduct, please call the Hotline. We appreciate your cooperation. Thank you.

Sincerely,

Thomas C. Lubben
Chief Compliance Officer

Editor’s Note:      “We  (Blue Cross) will not conduct business with anyone who does not operate with integrity” – What a novel concept!

Half guilty, half pregnant Arnulfo Olivarez, self-admitted felon, has had his upcoming November 24 sentencing postponed to March 4, 2010. It seems that the Wheels of Justice turn ever so slowly.

He has petitioned the court to allow him to contact school districts again as a means to continue his insurance livelyhood. Despite pleading guilty (August 2008) to bribing public school officials in return for lucrative insurance contracts, the Texas Department of Insurance continues to approve his insurance license renewals – he remains an active insurance agent.

According to Texas Department of Insurance, Olivarez currently represents Aetna, American Heritage, American Zurich, Anthem, Assurance Company of America, Aviva Life Insurance, BCS Life Insurance Company, Blue Cross & Blue Shield of Texas, Conseco, Cypress Texas LLoyds, Delta Dental, Empass Indemnity, Foremost County Mutual, Hartford, HM Insurance, Golden Rule Insurance, Humana, John Alden Life Insurance Company, Kanawha, Lincoln Benefit Life Insurance Company, Maryland Casualty Company, National Union Fire, New Era Life Insurance Company, New York Life Insurance Company, Northern Insurance Company of New York, Pacificare, Pan American, Principle, Prudential, Southern County Mutual, Standard Insurance, Sun Life, Transamerica Occidental, Unicare, United Healthcare, and Unum Life Insurance Company of America.

http://www.brownsvilleherald.com/news/case-89555-guilty-district.html?orderby=TimeStampDescending&oncommentsPage=1&showRecommendedOnly=1 

  Insurance Agent Arnulfo C. Olivarez

http://www.modernhealthcare.com/article/20091117/FREE/311179968#

As a friend wrote this morning, the Federal Government can not run a health care system much less manage a two car funeral procession. 

The Left’s health care “reform” plan will dramatically expand eligibility for Medicaid, a poorly-functioning program created in the 1960s to help low-income families.

Heritage Foundation expert Conn Carroll explains:

The Health care “reform” bills advancing in the House and Senate would expand Medicaid by making this government-run health plan available to all adults with incomes at or below 150% of the poverty line. The change would dramatically multiply eligible recipients, with 46 states seeing increases of at least 20%, including 16 posting jumps of 50% or more. Almost 21% of the entire U.S. population would be eligible for Medicaid and seven states and the District of Columbia would have eligibility rates of at least 25%.

Meanwhile, Heritage Vice President Stuart Butler debunks liberal myths about the proposed “trigger,” which would create a government-run health care “public option” if other reforms fail to work. This mechanism, he explains, provides few incentives to experiment with new approaches and its criteria would be hard to measure.

The Senate version of the health care bill, which has been written in secret, will probably be revealed this week, Heritage’s Brian Darling explains. The House narrowly passed its bloated big-government bill earlier this month.

AP poll released today says 57% of Americans favor taxing the rich to pay for proposed health care bill. Since almost 50% of all working Americans pay no federal income taxes, this will be welcomed news for the entitlement crowd.

Thousands of “rich” Americans are voting with their feet these days. According to Sovereign Natiion, hundreds of thousands are leaving – finding financial refuge offshore. Panama is attracting many, with favorable tax treatment for Americans tired of pulling the train.

The Dart brothers voted with their feet years ago. The billionaires denounced their American citizenship – http://en.wikipedia.org/wiki/Dart_Container

The only problem with socialism is that you eventually run out of others people’s money – Margaret Thatcher

 For an appoximate 2% load in their LTD program, employees can be insured up to $300 per month to subsidze COBRA premiums.

Editor’s Note: Why would an employer want to encourage COBRA participation?

http://www.healthplanlaw.com/ – Good website for ERISA groups. Also, www.stoplosslaw.com is another good resource for insurance consultants.

Editor’s Note: Readers of the Art of War know that one of the most important tenents of Tzu is one’s knowledge of the “lay of the land”.

Many employers are beginning to realize the benefits of hiring a fee based insurance consultant in lieu of a commission based insurance broker. There are many advantages to hiring a fee-based insurance consultant that we won’t go into here.

The most interesting phenomenon regarding fees to be paid to insurance consultants versus commissions to be paid to an insurance broker/agent is the employer’s perception of costs. There seems to be a difference in writing a check to the insurance company who in turn pays the agent a portion, than in writing a check to the insurance consultant every month.

Imagine having to pay your withholding taxes every month by sitting down at the kitchen table and actually writing out a check to Uncle Sam instead of having Uncle Sam’s “fee” automatically taken out of your paycheck!  Chances are you would think unkind things about Uncle Sam making you do this. You would probably want an explanation of how and where your money is going to be spent. That would be a logical thought process.

So, what is amazing to us is the reaction we sometimes get from prospective clients who are considering a fee-based approach over a commission driven approach. Here is a typical exchange:

Consultant: Sir, based on what you expect from us in the form of scope and services, and the time involved, our fee will be $25,000 per year, payable 1/12 per month for 12 months. If at any time you are unhappy with our services and see no further use of our experience and expertise, you can fire us without notice.

Employer: You have to be kidding me! That is a lot of money! I cannot afford that expense. Thank you for your time!

Consultant: But sir, you are paying your insurance agent $150,000! So why is $25,000 too much?

Employer: I pay my agent nothing, the insurance company pays him!

Such is the life of a fee-paid insurance consultant. Most do five times the work of an agent, at 1/6th of the cost.

09Article LouisvilleERs RFP to hospitals

http://www.whatstherealcost.org/wtrc/toolbox/connect.html?video&site

We do business all over the state of Texas. Each area of Texas has it’s own unique flavor of politics which drives and impacts business decisions, especially at the political subdivision level.

Longview has two hospitals that compete for business. Most physicians in town have admitting privilages at both facilities. As is the case in most situations, patients many times don’t select the hospital in which to seek surgical or medical treatment, their attending physician usually makes that decision. Hospitals have a vested financial interest with local physicians and to curry favor requires an on-going battle between competing hospitals.

There is competition among medical care providers. So how does a self-funded employer group tap into the economic opportunities available to them in situations like this? The answer is simple.

See Longview article here – Longview hospitals clash over doctors’ advertisements

Reports from Edinburg, Texas received by our own and famous Molly Mulebrier (pictured above), tells of a Battle Royale yesterday at the Edinburg Independent School District. Seems a lively debate of a 5 hour duration sparked strong interest among the attendees of the meeting. End result? The ECISD voted to award the multi-million dollar contract to Blue Cross.

See Board Packet cost analysis here – Edinburg ISD Spreadsheet 2009

Did a smoke and mirror debate regarding PPO discounts carry the day? Will the ECISD save money with this change in claim administrators? Will fixed costs go down? Will claims go down? Molly Mulebrier is adamant; she predicts costs will go up for the next Plan Year. And finally, who is going to pay the +$2 million cost of leaving?

A new association sponsored employee benefits program designed for Texas political subdivisions has announced that effective January 2010 members may access an array of employee benefits. Each participating political subdivision would access the program through an Interlocal Agreement.

The association will provide professional risk management services on behalf of member groups. Benefits include health, dental, vision, life and disabilty insurance, as well as auto and homeowners insurance program. Additional benefits include a stand-alone prescription drug plan, pre-paid legal insurance and dog & cat insurance.

For more information, write RiskManager@sbcglobal.net

A recent poll shows that 86% of Canadians like their government health plan. Canadian doctors average income is over $200,000, and they dont have to mess with insurance companies. Nor do they have to chase dollars from their patients. And, the Canadian health care system takes up about 10% of Canada’s GDP, as opposed to 16% in the United States.

Citizens pay little for their health care – no deductibles, small or no co-pays.  Sounds like a good plan.

But, what they pay in taxes is another matter it seems.

A recent request under the Open Records Act has produced an interesting dialog between the requestor and the custodian of public information:

Requestor:  In reviewing the information you provided, 2 + 2 = 4

Custodian of public information:   Where did you get that…………..I just don’t see it!       2 + 2 = 5 for sure!

Seems that three high school principles were out of town on school business, and late that night, in search of a hotel room, found the Sweet Dream Hotel on Wurzbach. The approached the hotel clerk, inquiring about available rooms and were told that there was only one left, and that the nightly rate was $30. Since it was late at night, and the three were tired after a long day representing their school district at a grueling seminar, they agreed to rent the room for the night. Each paid the clerk $10 for a total of $30, which was the nightly rate.

An hour later the hotel clerk realized he over charged the men for the room. The daily rate was only $25. So, the clerk instructed the Bell Hop to take $5 to room 213 to give the men a refund. On the way to the room, the Bell Hop, being a democrat, decided he was going to pay each of the three men $1 and pocket the left over $2 as his “tip.”

So, if each man paid $10, but got $1 back, each paid a total of $9. That means that 3 men paid $9 for a total of $27. The Bell Hop stole $2, which brings the total to $29. Right?

So where is the missing $1?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We are seeing group health renewals that make no actuarial sense these days. Renewals are all across the board. We are seeing renewals as high as +120%, with significant spread differences between carriers bidding on business. One of the BUCA’s told us last week, on a renewal we were working on with them, that they were not going to give any credit on claims exceeding the pooling point. And, there appears to be little interest amongst the carriers to negotiate renewals.

We are seeing carriers, bidding on the same group, using the same claim experience, duplicating benefits, with cost basis differencials of as high as 38%. Two underwriters, looking at the same data, are coming up with rates that statistically have no correlation.

I reviewed the renewal history of a group in Texas last week, and wrote to the client that I found the past two year’s rate adjustments to be unsupportable based on their own claim history. The client, whose background is in the health care field/insurance, wrote back and offered the following explanation:

Arnulfo “Half Guilty, Half Pregnant” Olivarez is scheduled to be sentenced for his crimes at 9:00 am on 24 November, 2009 in Federal Court, McAllen, Texas. Mr. Olivarez plead guilty to bribery of public officials in order to gain lucrative insurance contracts in South Texas. Last August 2008 Mr. Olivarez told Federal Judge Hinojosa that he was only half guilty of the crimes he was charged with, but guilty on the other half of the charges. If that is so, then Judge Hinojosa should consider reducing a possible 20 year sentence down to 10 years.

Is the BISD paying more than they should for admnistration of their self-funded health insurance program? Did the Board of Trustees award the contract upon the advice of their insurance consultant, and if so, did the consultant’s representation of costs mirror the Administration Contract presented and approved by the BISD after the award of the contract? Did anyone check to compare the contract to be approved against the contract that was awarded? Information we obtained under the Open Records Act suggests otherwise.

Information at hand shows that the BISD may be paying +$370,000 more than they bargained for. We asked the BISD to investigate, to determine if indeed our findings are accurate. Their response was abstruse and at odds with our inquiry.

The BISD response, in our opinion, offers the general public both the frisson of uncertainty and the challenge of speculating. However well intended, speculating in an informed manner, as to the truth surrounding the recent Request for Proposal process of the BISD $38 million group health insurance plan, can be illusory and dangerous. Preference should be given to exploring the facts. We hope that the BISD will stop stonewalling the public and comply with public record requests honestly and expeditiously.

We have sent a second request to the BISD asking for clarification of the mysterious $370,000.

Unicare has announced that they are exiting the commercial health insurance maket in Texas.

Their press release states “While UniCare continues to be financially secure, competitive pressures have made it increasingly difficult for us to maintain our high standards for excellent customer service and affordable, quality benefits that you expect from us.”

UniCare has entered into an agreement to transition existing business to Blue Cross Blue Shield of Texas.

Editor’s Note: United HealthCare seeks new business:

UnitedHealthcare Strongly Positioned with Recent Health Insurer Exit  UnitedHealthcare is ready to help you and your clients – today. The recent announcement of a health insurer to exit the Texas market makes this an ideal time for you to consider UnitedHealthcare for your clients and prospects. UnitedHealthcare serves over two million residents in Texas by consistently delivering: Broad Access to Affordable, Quality Health Care with more than 460 hospitals and 34,000 physicians. Personalized Client and Broker Support with Texas-based representatives to serve you and your clients’ every need. Broad Product Portfolios from medical plans to specialty products, all designed to meet a wide variety of client needs. Including UnitedHealthcare PlanBienSM – popular health plans enhanced with bilingual materials and services for our Spanish-speaking members. New Product Introductions like our soon to be released PacifiCare SignatureEliteSM Plus HSA plans. A Stable and Growing Network with more than 460 hospitals and 34,000 physicians in Texas. For more information on how we can immediately assist your clients with their health care coverage needs, please contact your UnitedHealthcare representative today. Thank you for your consideration of UnitedHealthcare.

http://m.brownsvilleherald.com/brownsville/db_15631/contentdetail.htm;jsessionid=AD9F92F8BAAD8297528F094CF6898B40?contentguid=85uPFAkK&src=cat&full=true#display

“It might be argued that because hospitals initially bill all of their patients at their chargemaster prices, they do not engage in price discrimination – the practice of charging different customers different prices for identical goods and services. Invoices at chargemaster prices, however, are insincere, in the sense that they would yield truly enormous profits if those prices were actually paid. The reality is that hospitals accept different payments from different payers for identical services, and that can proberly be called price discrimination.”

“Price discrimination is sometimes decried as unfair, and it may be so. It is, however, commonly practiced by the hotel, airline, pharmaceutical, and telecommunications industries; by public utilities; and by universities, where different classes of students are granted widely varying discounts off full tuitiion, partly as a reward for intellectual acumen, or on the basis of the family’s ability to pay. Price discrimination also is a perfectly natural phenomenon in any health system not subject to price regulation.”

“All of these industries have several things in common: They have high annual fixed costs relative to the incremental cost of producing additional services; they can segment their markets into distinct classes of customers, each with different degrees of price-sensitivity; and customers cannot resell their products among themselves, because it is either technically impossible (such as for physician or hospital treatments) or illegal (such as for pharmaceutical products).”

Source:  The Pricing of U.S. Hospital Services: Chaos Behind A Veil of Secrecy – by Uwe E. Reinhardt

Editor’s Note: Read full article here – http://content.healthaffairs.org/cgi/reprint/25/1/57?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&author1=reinhardt&fulltext=Chaos+behind+a+veil+of+secrecy&andorexactfulltext=and&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT

http://www.cbsnews.com/video/watch/?id=5419844n&tag=related;photovideo  – Video

http://www.cbsnews.com/stories/2009/10/23/60minutes/main5414390.shtml?tag=contentMain;cbsCarousel – Article

Once upon a time, Molly Mulbrier hired a general contractor to help her build her house. The General Contractor came highly recommended with impeccable credentials. And, he was only going to charge her a flat fee of $48,000 to help her build her $40,000,000 dream home. Molly was ecstatic.

The General Contractor promised Ms. Mulebrier that he would bid out all the subcontractor jobs to get the very best deal for her. He bid out for the foundation work, electrical, plumbing, painting, dry wall, etc. on her behalf.

Finally the day came when the General Contractor laid out his bid spreadsheet for Mrs. Mulbrier and her banker. “The best overall bid package” he explained,  “will cost you $40,000,000. But, one of my subcontractors, the electrician,  has promised to give you a credit for $1 million, so your net cost is only $39,000,000. This beats all the other bids we got for you. Of course, you must pay the full $41,000,000 up front, then I will carefully monitor the money flow and make sure you get back the $1 million at some point in time”.

“Hmmmmm”, mulled Molly, “I see nothing in your contract with me that references this. Can I see your contract with the electrician?” …………….”Unfortunately Ms. Mulebrier, I cannot show you that contract because of my Confidentiality Agreement with the electrician, but just trust me, I will make sure that he lives up to his end of the bargain!” sneered the snarling  and sinister contractor.

And so the house was built.

Editor’s Note: This is a fictional fairy tale (as opposed to a true fairy tale). Any similarities with a real life scenario is purely coincidental.  Molly Mulebrier is our in-house private detective who has agreed to allow us to use her real fictional name.

If this article is disturbing to you, then your completely normal.

http://www.john-goodman-blog.com/some-american-hospitals-already-have-price-and-quality-transparency-with-package-prices-quoted-in-advance-%e2%80%94-so-long-as-you%e2%80%99re-a-foreigner-that-is/#

http://www.northamericansurgery.com/

Bill, you can share the following if you’d like:

 Last fiscal year (Oct-08 through Sep-09), TISDs Medical Benefit Plan paid 22.1% of billed medical charges.  Total charges were $28,985,140.10, total payments were $6,393,165.45.  And that was including a >$600K premi claim.

Direct contracting works… I’d like to see anyone match these discounts.

David Herbert, M.D.
President, Medical Administration
GM&A
(325) 224-3245

Editor’s Note: Dr. Dave and his partner, Michael Jeneke assist employers throughout the United States in contracting with medical care providers. The Tyler Independent School District is a stunning representation of what can be accomplished by directly contracting with medical care providers. They have proven that hospitals and doctors will compete for business if given the opportunity. For more information go to www.gma-usa.com

http://www.tdi.state.tx.us/consumer/cpmmediation.html

Readers of this weblog will know that we are investigating the recent award of a $40,000,000 health insurance contract at the Brownsville Independent School District.  We have requested information from the BISD through the Open Records Act and to date have received very little from the district – BISD has refused to provide us with all the information we have requested and has asked the Texas Attorney General to intercede.

One of the items requested from BISD are copies of all contracts with vendors associated with the self-funded health plan. Various vendors include the third party administrator (TPA), pharmacy benefit manager (PBM), preferred provider organization (PPO), and stop-loss carrier. 

We know that the BISD has signed a contract with the TPA because we have obtained a copy of that contract (see posting below). So, we assume that the BISD has signed all the other contracts as well. But, did someone in the BISD read these contracts before signing, and did anyone, including the hired consultant for BISD, compare the contracts to original and final proposals submitted by vendors during the RFP process?

Do any of these contracts include a stipulation that the BISD will not compete with the vendor? For example, should the BISD wish to directly contract with area medical providers, will they be able to do so or will they be prevented from doing so for a two year period upon termination of the vendor contract? If that is the case, which we are confident is the case, then the BISD will be prohibited from negotiating directly with interested medical care providers for the next three years.

An example of a non-compete clause in contracts can be found in the San Benito ISD contract with an on-site medical clinic for employees. Several years ago the SBISD contracted with a third party to administer their on-site clinic. But, the contract contained a non-compete clause prohibiting the SBISD from retaining the on-site clinc physician upon termination of the contract. After two years on board with SBISD, the physician became extremely popular with SBISD patients who developed a strong trust with him. A change in clinic administrators last year brought the non-compete section of the contract to light. Although SBISD wanted to retain their beloved physician, they were prevented from doing so and had to go out and find a replacement.

So, is anyone reading the contracts at the BISD, or just signing them without question?

The Brownsville Independent School has advertised for a Request for Qualifications for auditor to conduct a review of the BISD health insurance program. We think that the first course of action for the auditor is to review the work product of the BISD’s insurance consultant for a comparison to actual contracts signed by the district. Our preliminary review indicates that Mr. Aguilar, President of the BISD school board, may have signed a contract that  appears will cost the taxpayers an additional +$371,000 in administrative fees. If true, someone needs to be held accountable for this significant variance from the recommendation/s made to the BISD Board of Trustees (a $371,000 additional administrative cost = approx. 15% variance in total administration costs).

The auditor’s job will be only as good as the BISD wants it to be. The parameters within which the auditor will be empowered will be dictated by the those that hire him/her.  In our opinion, the auditor should be given a full and wide range of parameters within which to work. A $40 million budget item deserves close scrutiny – the cost of the audit should not be a deciding factor in hiring.

MedReview LLC was at one time hired by the BISD. Their report received little attention from the Board of Trustees at the time. A review of the video of the board meeting during which a representative of MedReview LLC made his presentation, will show total lack of interest, with cursory remarks made by members of the then sitting board. The presenter wanted to begin a slide show presentation, but was asked not to by one of the board members who stated “no need to spend time on your slide show…………we have all read your report and we are good with it.”

However, a close and careful review of the MedReview audit details concise and informative information. We are positive that if the same comprehensive review is performed again, significant findings will be exposed.

The auditor should be directed to review all contracts in place that are associated with the BISD health plan. These contracts need to be compared, line item by line item, to proposals recieved during the recent RFP process, as well as compared to the consultant’s work product and written recommendations. Any variances should be questioned as to accuracy.

There are many forensic auditing firms in the market that specialize in self-funded employee welfare plans. We hope that the BISD selects a firm that is non-local, independent with a proven track record of forensic auditing. We hope that the BISD will give the auditing firm wide berth to investigate the entire BISD health plan and not limit the examination to a selected and few hand picked areas of focus.

Editor’s Note: We hope that the FBI and the Texas Attorney General open an investigation into the BISD insurance program. We suspect they already have done so.

The Brownsville Independent School District, a 7,400 life school district located in deep South Texas, recently went out for a Request for Proposals for their self-funded employee health insurance program. The district developed proposal specifications internally, advertised for public proposals, then hired an independent fee based insurance consultant to review the submissions acquired as a result of this process, negotiate with vendors and make recommendations to the BISD Board of Trustees.

Dispite being the largest employer south of San Antonio, the BISD does not employ an in-house professional risk manager or staff with the experience and qualifications to manage a $40 million self-funded health plan. The BISD has historically relied on outside insurance experts to assist in the management of the plan.

Based on the recommendations of the consultant, the BISD awarded the group health contract to a new third party administrator as the best and lowest proposal. The consultant represented to the Board of Trustees that the move would save the district money in administrative costs, as well as an estimated savings in claims of $4.5 to $5 million.

The vendor who lost the business cried foul. On public record, they provided a line by line rebuttle of the consultant’s recommendation and urged the BISD to audit the process and reconsider their decision to move.  This peaked our curiosity. We asked the BISD to provide us information under the Open Records Act.

As of this post, we have not received all the information we have requested, however we have enough so far to place doubt as to the integrity of the RFP process.

In reviewing the consultant’s spreadsheet that was presented to the BISD Board of Trustees, with a comparison to the Administrative Services Agreement that was executed by Rolando Aguilar, President of the BISD Board of Trustees, we find that in comparing the consultant’s numbers to the actual contract, there is an annual difference in administrative costs of $371,349.36. 

And, rather than disclosing line item costs in the Administration Agreement, the costs shown are inclusive of various services / products to be included.  That is much like receiving a telephone bill or credit card statement with the total amount due without a line-by-line transaction report to support it.

Since the information we have obtained seems to not support the consultant’s work product, we question other areas of concern that a prudent risk manager should recognise as a fiduciary duty to his client. We have made several additional Open Records requests but to date have not received the information. The BISD has requested an opinion from the Texas Attorney General on some of the items we have requested, as they should do to protect trademark secrets, privacy, etc.

Unfortunately, after reviewing the Administrative Agreement we conclude that some of the contracts involved in the BISD health program will probably be unavailable to public inspection. It appears that the BISD is a third party beneficiary of some of the contracts, and therefore not a party to the contract. If that proves true, not even the BISD will be able to read, review and analyze some to the contracts in place. And, it is our opinion that when you cannot review a contract, you are probably paying more than you should.

BISD Consultant Presentation  BISD Consultant Presentation vs Signed Contract  Consultant Presentation to BISD Board  Exhibit B-Compensation BISD MAA

Editor’s Note: This is just a preliminary review of material received from the BISD. There is much more work to do here in analyzing the data submitted during the RFP process. We will attempt to find every single line item cost associated with this $40 million group health plan. If there are any hidden revenue streams, we will find them in time.

Of particular interest will be the stop loss policy (why did the consultant show only ING? Why did ING increase premium 10% with the TPA they were doing business with versus the TPA who was awarded the business? Was there a better stop loss proposal, with better contract language and lower premium? If so, why was that not shown on the spreadsheet?) Of additional interest will be the Pharmacy Benefit Manager contract – are there fees/commissions within the PBM contract, and if so, what are those fees? Lastly, the PPO contracts will provide useful information as to the claim that the BISD “will save $4.5 – $5 million next year with the new PPO network.”

The BISD Board of Trustees has decided to hire an outside independent auditor to review the BISD health plan, and we applaud that decision. We hope that this is not just lip service to the tax payers of Brownsville.

The costs associated with administering a self-funded employee medical program can be confusing to many. There are  many “moving parts”, some of which are inter-dependent while some are not. Some of the “parts” are much like a vermiform appendix, completely useless. Each part is assigned a cost factor, much like an automobile engine. The water pump costs $250, fan belt is $34, spark plugs are $3 each, ect.

In a Request for Proposal for a self-funded group medical plan, consultants usually ask vendors to indicate costs on each line item of their proposal. For example, how much is the cost of claim administration, PPO access fee, stop loss insurance, broker commissions, utilization review fees, etc. An Excel spreadsheet is utilized to compare line item costs by vendor and this is usually provided as part of the consultant’s recommendation and upon which a decision to purchase is made.

However, somewhere and somehow during the RFP process, a process that is “fluid” in some instances, interpretations and understanding of proposals submitted can be misinterpreted or misrepresented utilizing the all-famous method of comparing various vendors – the dreaded Excel Spreadsheet.

A careful post review of an awarded contract would entail three considerations; What did the Plan Sponsor (employer)  think they were awarding, 2). What was awarded and 3). What will the Plan Sponsor actually pay contractually?

So, if the water pump costs $250, and the fan belt is $34, as shown on the consultant’s Excel Spreadsheet, why would the contract show: “For providing a water pump and a fan belt, the total all inclusive cost is $300”? Would it not be a prudent business practice to question why the “all inclusive”cost is $16 higher than the cost shown on the consultant’s Excell spreadsheet? Would you sign this contract? A 7,400 life Texas public school district just did.

Editor’s Note: We will post an actual real life example of a recent award of a $40 million self-funded health contract with documentation obtained under the Texas Open Records Act. We will leave it up to the reader as to conclusions to be drawn.

Jeff Barber- Congressional Testimony

Editor’s Note: Jeff Barber is a forensic auditor in El Paso, Texas. He can be reached at 915-757-7819

Claim administrator ignores hospital’s billed charges – pays cost plus 12%.  Article states that discounts off billed charges have increased over the years, yet costs keep going up. A shell game?

What makes more sense – cost plus 12% or a “discount” off billed charges? 

With hospital’s real costs, insurers, individuals can negotiate prices News for Dallas, Texas Dallas Morning News Jim Landers Business Columnist Dallas Morning News

Editor’s Note: PPO network representatives, carriers, hospital administrators and bloated insurance brokers are seething. Lucrative revenue streams are threatened. If money drives behaviour, how are hospitals going to fight dastardly cost-plus warriors? Will hospitals “play ball”  or gather their marbles and go home?

An excerpt from trial records gives one a clue to hospital Charge Masters – “The total bill for Mrs. Doe’s hospital stay was $6,731.05. This amount was determined according to the hospital’s “Charge Master”, a confidential list of charges made by the hospital for all its goods and services, which is used to compute charges for all private commercial patients who are treated on a fee-for-service basis. The Charge Master is compiled and maintained by the hospital’s chief financial officier on the hospital’s computer system. In 1991, the Charge Master contained approximately 295 pages and listed prices for approximately 7,650 items. The Charge Master is considered confidential proprietary information and is not shown to anyone other than the officers and employees of the hospital and authorized consultants. The Charge Master is adjusted on a weekly basis to reflect current cost data; the hospital’s costs are marked up by a mathematical formula designed to produce a targeted amount of profit for the hospital. When the Charge Master is adjusted on the hospital’s computer, the hospital does not preserve or archive the earlier versions of the Charge Master.”   Hospital Charge Master

Editor’s Note: Seems to us that  hospitals us their Charge Master as the basis a cost-plus pricing methodology. If that is true, then why do hospitals insist on negotiating pricing with payers on the basis of “discounts off billed charges” rather than a more transparent cost-plus model?”

The cost-plus method of paying hospital bills seems to make sense to many employers, with a growing number switching their plans from “secretly” negotiated PPO contracts to a fully transparent model. Cost savings achieved have been documented to be as high as 40% or more.  Bill Miller Forbes

Cost based pricing makes sense for several reasons. First, the method of pricing is relatively simple and straightforward. Second, in the past hospitals were primarily reimbursed based on costs and to go back to that method of reimbursement is not stepping into new territory. Third, when prices are based on costs, they are generally perceived to be equitable and justifiable. This could be particularly important in view of the current national health care debate –  health care has become a social issue rather than a predominately economic one.

Although cost-plus makes sense to many, hospital administrators we have met  are slow to embrace the concept. While they agree that cost plus makes sense, they cite many reasons for their opposition. “We can’t accept a cost-plus method, what would all our other contracted payers think! – we can’t give you a better deal than we gave all the others!”  “That would violate our Favored Nations Clause with ABC Insurance Company.” “We can’t track a cost-plus method internally, our bookkeeping system won’t allow it.”  Or, “our cost, as reported to CMS, is really not completely accurate (wink, wink) and therefore you won’t be able to know what our true costs are – consequently a cost-plus arrangement would be impossible to quantify both internally and externally – therefore we would be happy to talk to you about discounts off our billed charges.”

Hospitals insist that the only fair and equitable way to develop a reimbursement methodology is to embrace their concept; discount off billed charges. Yet, what are the billed charges and how are they developed? Will hospitals provide their Charge Master pricing to the public? Is there a relationship between billed charges and cost?

In reality, discounts are meaningless. One hospital could offer steeper discounts than another, yet still be the higher cost hospital. Cost plus seems a more logical and prudent business practice. It is a concept hard to argue against.

Insurance consultant’s worst fears are vendors who publicly question the validity of their work product. That is especially true if a vendor presents “facts” to support their contention that the consultant’s recommendation/s are based on data that is flawed, fradulent, tainted, incomplete, skewed, misrepresented, or does not generally support the consultant’s recommendation/s in a clear, concise and unquestionably logical way.

Insurance consultants are wise to document all activity as relates to work performed on behalf of his client. All telephone conversations should be memorialized to file, all emails saved, spreadsheets double checked for accuracy, vendor sign off on the consultant’s work product to be presented to his client, careful review of all proposals received and all correspondence between the consultant and his client, as well as all correspondence with vendors, should be kept to file. It is incumbent upon the consultant to document all activities to protect against “vendor backlash”, especially when working with political subdivisions such as the Brownsville Independent School District. E&O Insurance policies may require this as well.

Yesterday at the Brownsville Independent School District, a HealthSmart presentation to the Board of Trustees questioned the work product of the district’s insurance consultant. Contrary to the consultant’s representations to the district (upon which the Board of Trustees awarded a $38 million health insurance contract), the representative from HealthSmart attempted to “set the record straight” by providing “facts.”

If a consultant represents that Company “A” is less expensive than Company “B”, but a vendor goes on public record and states that Company “A” is more expensive that Company “B”, would it not be true that one or the other may be misinformed? If PPO Network “A” has better discounts than PPO Network “B” according to the consultant, then how can PPO Network “B” be better according to the vendor? If premium for stop loss insurance is lower for Stop Loss Company “A” ,according to the consultant, than for Stop Loss Company “B”, then how can a vendor support the statement that Stop Loss Company “B” is less expensive?

If, as the HealthSmart representative stated, that moving the $38 million contract from HealthSmart to the recommended vendor will cost the district (taxpayers) more, then who are we to believe? Do we believe the “expert” consultant, or do we believe HealthSmart who lost the business? The presentation by the HealthSmart representative, in our view, was compelling.

There is one way to ferret out the truth. A careful review of all documents submitted during the request for proposal process should put to rest any alleged descrepancies. We have asked under the Open Records Act for documents relating to the BISD proposal process. Once we receive this public information, our staff will devote the time and resources necessary to evaluate the proposals in question to determine the truth. We will publish the results on this weblog, with detailed documentation.

In light of this apparent controversy, it would not surprise us if all of the other vendors (as many as 21 different companies) who submitted proposals under the BISD health insurance request for proposal process, ask for copies of the consultant’s work product in order to determine if their proposals were accurately and fairly presented to the Board of Trustees.

Editor’s Note: It will be interesting to review the various contracts to be issued with the new health insurance plan. Will the contracts be part of the public record? Or will the contracts be proprietary and unavailable to the public? Will the various contracts be directly with the BISD, or will some or all of the contracts be with third parties? For example, will the Pharmacy Benefit Manager contract be with BISD, or will the contract be with the TPA? Will all the contracts contain a “right to audit” clause that favors BISD, or one that favors the vendor? Will the contracts disclose financial arrangements with parties to the contract?  Will all vendors be required to sign a disclaimer clause stating that they will receive no additional renumeration of any kind other than what is disclosed in the contract?

Email received recently from a consultant friend of ours up North:

“Hey All, this piece really says it all about all these network savings analysis’ by insurance carriers…..well written from a PPO in the Carolinas. I plan on posting it to my website. Even using the best methods of comparison that they recommend, it’s still a crap shoot as to the savings…………….of course this is all the stuff that the “consultants” who place all their business with the carriers are not saying…………..besides, a good majority of them dont know S__T from shine-ola (as my Dad used to say) and wouldn’t understand this if they read it.”

“Some of you who I am sending this to are struggling with these issues right now. Best of Luck!”

medcost-white-paper                                  http://www.medcost.com/

Alan T. Sorensen wrote a treatise on PPO discounts. He is affiliated with the Graduate School of Business, Stanford University. Below are a few excerpts in which he exposes some basic fallacies we all have been educated to believe.

“Payer size appears to affect bargaining power, but the economic significance of the effect is small. Much larger that the effect of payer size is the influence of payer’s abilities to “move market share” by channeling patients to hospitals with which favorable discounts have been negotiated.”

Interpretation: Size matters little, steerage matters greatly. However, when you look at the provider panels of PPO networks, you see almost every hospital on the network – therefore little or no steerage – we dont have PPO’s anymore, we have APO’s (all providers network).

“Pauly (1998) has noted (and the data here confirm) that even very small managed care organizations (MCO’s) often negotiate substantial discounts from hospitals.”

Interpretation: Size matters little

“Results from an econometric model suggest patient channeling is relatively more important than payor size in determining discount magnitudes; in particular, the impact on discounts of a one standard deviation increase in a payer’s ability to channel patients is roughly eight times larger than the impact on an equivalent increase in payer size.”

Interpretation: Size is not as important as steerage

“The second difficulty inherent in this study is that hospital’s listed rates may vary, so that reported discounts may reflect percentages of unequal bases. For instance, if two hospitals charge $200 and $180 (respectively) for the same procedure, and a payer negotiates a 10% discount at the first hospital but no discount at the other, the data will indicate that the payer has a more favorable discount agreement with the first hos;pital even though it pays the same price at either facility.”

Interpretation: Discounts off billed charges mean little when comparing PPO discounts

“The point estimate suggests that increasing a payer’s hospital payments in a county by 10% would enable the payer to extract an additional one tenth of a percentage point in discount negotiations with hospitals. Although this effect is statistically distinguishable from zero, its apparent economic significance is very small.”

Interpretation: Size matters little

Editor’s Note: Bigger is Better, or is it? Not according to this expert. How many times have you heard a group representative for one of the national carriers tout their “superior” discounts due to their large market clout? How then, did a small company out of San Angelo, Texas, for example, assist the Tyler Independent School District in negotiating better provider contracts and save +40%  without reducing benefits? Could the answer be “Steerage?”

For a copy of Mr. Sorensen’s treatise, email RiskManager@sbcglobal.net

Any devoted reader of this weblog will understand how we feel about Preferred Provider Organizations (PPO) and the value they bring to medical plan payers. All PPO’s, both rental networks and proprietary networks, will tell you that their discounts are the best. Yet none will show your their contracts with physicians and hospitals as they are “confidental and proprietary.” So, is there another way to prove that one network has deeper discounts than another?  Yes, say many insurance consultants, “let’s re-price a couple of claims through different PPO networks – we will certainly be able to distinguish the best discounts from the worst discounts.” This makes sense, or does it?

In prior postings we have attempted to show the reader that a claim re-pricing exercise is not an accurate method to determine a correlation between various networks. In fact, the process lends itself to fraud, whether intentional or not.

In the Brownsville Independent School District case, a large 7,500 employee South Texas employer, the PPO network discounts issue has been the driving factor in the district’s recent decision to change from the HealthSmart PPO network back to the Texas True Choice PPO network (effective October 1, 2009).  As a reminder to the reader, Texas True Choice was the district’s PPO provider prior to Healthsmart.

The district’s insurance consultant recently stated at a school board meeting that a change from HealthSmart to Texas True Choice, “assuming the same exact claims occur next year, will save the district anywhere from $4.5 million to $5 million next year.” That is a very bold statement indeed. Can the consultant back this up with solid evidence, or was a sample claim re-pricing method used to come up with this astounding figure.  Why would the local provider community willingly forgo $5 million in lost profits?

In February, 2007, at the time the Brownsville Independent School District was using the Texas True Choice PPO network, the district hired MedReview, LLC, a medical claim audit specialist firm with offices in Denver, Chicago, Philadelphia, Scottsdale, AZ and Thomasville, GA, to audit the district’s group medical claims.  (http://www.medreviewllc.com ) MedReview audited claims paid between October 1, 2004 and September 30, 2006, a period of time during which all claims were subject to the Texas True Choice PPO network discounts.

The objectives of the medical claims audit included, among five catagories, analyze “actual discounts produced by the provider network (Texas True Choice).” – Page 1 of the MedReview Report as submitted to the Board of Trustees.

“The audit covered all claims incurred during the period October 1, 2004 through September 30, 2006. For this period, Mutual of Omaha (acting at third party administrator of the plan – Texas True Choice was the PPO network) provided an electronic claims file which contained a total of 148,323 claims with total paid amounts of $54,579,542.” (page 4). ………….”A number of claims were identified that had been re-priced, or discounted, incorrectly by Mutual of Omaha which resulted in claim overpayments of $561,803.35.”

In addressing provider network discounts, MedReview wrote “During the audit period, the Texas True Choice network delivered an average discount of 34.2% on professional claims, 45.5% on facility claims, and 41.0% on all claims. Please note these calculations are based on all claims and all providers. It is not uncommon for provider networks to inflate their average discounts by excluding some types of providers that historically, give very small discounts, i.e, children’s hospitals.”

So, if MedReview’s analysis is correct, how do these “discounts” compare to HealthSmart’s discounts? Is there a $4.5-$5 million difference between the two?

Do the HealthSmart discounts for the twelve month period ending June 30, 2009 match or exceed the discounts achieved by Texas True Choice as reported by MedReview? Did 7 premature births skew the numbers? Was that taken into account by the consultant? Did the consultant re-price 100% of the claims as recommended by MedReview, or did the consultant re-price only a few selected claims?

In our opinion, after exhaustive analysis of various PPO networks over the past two years, as well as obtaining actual PPO contracts, both physician and hospital from various PPO networks, (we have a Blue Cross Hospital Contract, for example) it is our stand that PPO network discounts do not vary by much. With all hospitals joining almost all networks, there is little incentive to give one network a much better deal than another.  truth-about-ppo-discounts

The MedReview report is eye opening. It has good information which the Brownsville Independent School District would be wise to use in managing their health care costs. For example, the report shows that one physcian had 10,540 claims from BISD employees. The next highest physician regarding number of claims was 2,928. A review of physician #1’s claims as compared to his competitior’s charges would be most interesting to a bonafide risk manager. The most utilized hospital was Columbia Valley RMC. with a total of 2,625 claims as compared to Valley Baptist with 2,405 claims.

The Brownsville Independent School District should eliminate their participation in any PPO network and negotiate contracts direct with interested providers. Tyler Independent School District did just that four years ago and have cut their claim costs by 40-50% while maintaining superior benefits – much better benefits than those in place for employees of the Brownsville Independent School District. (www.gma-usa.com)

Most are not aware that physicians and hospitals will, and do, compete for business. Yet, we all still continue to rely on third parties to negotiate “discounts” on our behalf as third party beneficiaries of PPO contracts. Of course, we really dont know how good a job the PPO’s have done on our behalf in negotiating “good deals” for us. The “Trust Me” factor may be costing us money.  bill-miller-forbes

Editor’s Note: For a copy of the MedReview Audit Report, email RiskManager@sbcglobal.net.

hr-3200-lewin_public_plan_national_all

“………………………..you cancel a healthcare contract with one of the largest health care group insurance providers and award it to an unknown company from Oklahoma, with few staff, only one nurse and no track record.”

A new website, www.carebrownsville.org calls for the ouster of four of the Brownsville Independent School District’s school board members. Concern is expressed on the district’s recent decision to change health insurance providers. How this plays out will be more than interesting.

A $40,000 funded compaign is rumored to be spent towards billboard advertising and television spots to be aired 200 times between today and Monday, just in time for next Tuesday’s scheduled school board meeting. (http://www.bisd.us/PDFs/Board_Agendas/09_10/Agenda%2009_01_09_Agenda.pdf) Who is behind this? Could it be Carlos Quintinilla of Accion America?  (http://www.accionamerica.com/)   

Carlos “The Bull Dog” Quintinilla

Pain management can be costly. Recently we had a client who was charged close to $1 million by a pain management clinic on a single employee who sought treatment at the clinic during a 12 month period. We intervened and questioned the costs of procedures. We received an analysis from another physician who reviewed the medical case notes, and found the treatment plan “irresponsible and unncecessary.”

Today, we were notified that the same pain management clinic is treating another client of ours, with ten office visits thus far costing the employer’s self-funded plan in excess of $13,000.

Of course, the patients have no clue as to the charges submitted by this physician.

http://portland.bizjournals.com/portland/stories/2004/11/22/focus1.html

Medical tourism is catching on fast with over 500,000 Americans seeking medical care abroad last year. Some self-funded employer groups are offering a voluntary medical tourism benefit as a method to achieve plan savings through use of accredited foreign hospitals. However, some are concerned about liability issues involved with foreign medical services. AOS, a Barbados based insurance company, has developed a product to address these concerns – http://www.aosassurance.bb/PublicHtml/malpractice_insurance.htm.

Of course, due dilligence is always paramount before placing cover.

BEIJING – China has launched a national organ donation system to try to reduce its dependence on body parts harvested from executed prisoners, who make up the majority of donors, state media reported Wednesday. http://news.yahoo.com/s/ap/20090826/ap_on_re_as/as_china_organ_transplants

The National Association of Purchasing Management, RGV Chapter, is having their annual conference on South Padre island next month. Purchasing managers from throughout the state attend this annual event. For more information go to www.napmrgv.org.

Here we go………………..Illinois approves insurance contingent commissions. RIMS voices opposition – cites Conflict of Interests.

http://www.property-casualty.com/News/2009/7/Pages/RIMS-Fears-All-Brokers-Will-Get-Contingent-Fee-Okay.aspx

http://www.tpadirectory.com/

http://online.wsj.com/article/SB10001424052970203946904574298661486528186.html