Health Care Reform Bill presents 10 major problems: (1). The Bill lacks meaningful ways to control health care costs, (2). The Bill sets the nation up for even worse deficits and crushing nation debt, (3). There is no support for evidence-based medicine, (4). There is no independent commission that could help Congress make the decisions to eliminate wasteful and harmful treatments and spending, (5). Bill does nothing to correct medical liability problems, (6). The Bill does not expand employers’ ability to help employees actively engage in wellness activities or achieve health goals, (7). There are serious questions about the public option and how it would operate , (8). It opens ERISA plans to unacceptable burdens, (9). The Bill requires employers who are currently covering retirees to continue new and current retirees indefinitely, (10). Employers that provide comprehensive health care benefits could still be subject to an 8% payroll tax if employees decline coverage because it costs more than 12% of their income.

Editor’s Note: This was taken from Editors Desk, 8 December 2008 edition of Employee Benefit News.

MyHealthGuide Source: Dwight Mankin, President, NCN, www.ncnelink.com, 12/2009 via Passion for Subro

Over the last few months we have seen a spotlight directed at healthcare. Whether the debate is focused on access or cost, we are faced with dealing with the structure and delivery of healthcare for the future. But as the debate goes on, one has to ask the question, “How did we get here?” It is by asking the question and answering it in an intelligent manner are we best able to avoid the mistakes of the past and provide a workable solution for the future. We cannot afford to have history repeat itself.

What Happened

For decades, the concept of pre-negotiated discounts for in-network care has been the most common approach for keeping rising healthcare costs at bay. Employers keenly focus their cost-containment efforts on in-network services offered by PPOs, since between 70 and 90% of medical expenses of insured patients are incurred on in-network procedures. So if most insured procedures are in-network with deep, negotiated discounts, why are medical costs so extreme and health insurance premiums so high?

The Promise of Steerage

What does the PPO vendor have to offer a provider in exchange for a deep discount? The answer is, simply, patients — what the heath care industry refers to as “steerage”. In theory a carrier approaches a provider (facility or physician) and offers a volume of customers — its members — in lieu of discounts passed on to those members. By listing the provider as part of its exclusive network, the PPO can offer its patients better pricing for that service than the patient would get otherwise. Patients want more than just discounts, they want options.

The Appeal of Options

For patients and employee groups, the price of the health insurance premium plays a huge part in selecting a PPO network, but that factor can adjust with co-pay and deductible thresholds. The real appeal is the PPO’s size and relevance of its network. For example, brokers to large employers measure their effectiveness on how well they can fit a company’s plan with a carrier that manages and covers the employee base with as many in-network facilities and doctors as possible. In essence, a larger, more developed network gives patients (the employee base) more choices, making opportunity for in-network pricing more likely. It is the development of these large PPO networks and even the supplemental (wrap) networks outside them that are a driving force in the rising cost of healthcare.

Over-developed Networks

As PPO networks expand their list of “preferred” providers, their steerage becomes less exclusive. Yet deep discounts are still required of providers to maintain their inclusion in the network. As a result, providers have to raise the “retail” cost of care to offset the discounts offered, since the discounts are not overcome by the volume and steerage expected. Bruce Japsen, long-time health-care business reporter for the Chicago Tribune, puts it in blunt terms: “Once the market is saturated with PPOs (and HMOs), rates must reflect the true costs of delivering care plus a modest profit or the health care market will collapse.”

A New Model

Industry veterans agree that the quickest way to bring US healthcare costs in check is real price transparency that helps the patient make informed decisions. Dr. Stanley Feld, retired endocrinologist and avid proponent of healthcare reform states that “The consumer is not stupid. When they are in control of their healthcare dollar, they will force real price transparency.” The “real price transparency” he refers to is a cost-based model, not a superfluous detailing of charges. Until such cost-based methodology is widely adopted by healthcare payers and providers, patients will suffer the consequences of an industry that ineffectively tries to repair itself through contract negotiations, restructured administration and expanded PPO networks. If this if not dealt with quickly, history will surely repeat itself.

About NCN

NCN is the national leader in cost management for out-of-network claims. We use cost-based data and transparent reporting to maximize savings on healthcare claims. At NCN we claim a better way for payers, providers and patients. Visit www.ncnelink.com.

Editor’s Note:  Cost-plus hospital reimbursement methodology is becoming an important risk management tool employed by self-funded employer groups. See White Paper – Health Care Strategies for Texas Political Subdivisions

This California company has figured out a way to offer prospective clients a value added service in the selection of group health insurance plans – www.superagent.com

December 30, 2009, 7:00AM

By PETER MAHR

As a family physician I must write to convey my frustration and indignation with the Senate health care bill.

 It is an immense bill offering minor advances in the access to health care for Americans via private insurance, the expansion of Medicaid and the increase in money for community clinics. But in cementing the role of private insurance as the vehicle for Americans to access necessary health services, the bill wastes billions of dollars a year due to the inefficiency and profit motive inherent in this system.

 Furthermore, the bill will still leave millions without any insurance and even more people underinsured. Those who have insurance with affordable premiums will find the cost-sharing (deductibles, co-pays and out-of-pocket expenses) onerous. Those with insurance offering adequate access to health services will pay premiums that are unaffordable.

 Finally, by taxing Americans four years in advance of the initiation of subsidies for the purchase of insurance, this bill underestimates the true cost to our country. In the end the bill will mandate that all of us buy into and subsidize the inefficient and expensive private health insurance financing system we have today.

My frustration doubles when I realize that there is a viable, efficient and affordable alternative to health care financing that could be enacted tomorrow. With a system of national health insurance, we could cover 100 percent of Americans at a dramatically reduced cost for families, businesses and our country. Under a national health insurance plan everyone pays into the insurance pool via progressive income or payroll taxes.

Let’s call this our premiums. Then, when we are sick and go to the doctor or have a surgery, the doctor or hospital gets paid from the money in the pool. It is not socialized medicine: Doctors and hospitals continue treating patients as before. They remain private and autonomous.

Since a national health insurance system eliminates the profit motive, as well as the advertising and executive pay associated with private insurance and slashes burdensome and expensive administration on the doctor and hospital level, it would finance access to health care for all while reducing costs dramatically.

Finally, my frustration will pale in comparison to the American people’s anger when they find out what the Senate bill means for them. In the Senate bill, the Congressional Budget Office estimates that a family of four with a household income of $54,000 would be expected to pay 17 percent of their income, or $9,000, on health care costs. On the other hand, a family of four making the median income of $56,000 would pay just $2,900 under a national health insurance plan.

If the American people knew that we could organize our health care financing in an efficient, fair and affordable manner, and reduce their family’s health care costs by a third, they would jump at the chance. If they find out after the fact, when they are paying taxes to subsidize a private insurance system that does not meet their health care needs and puts their personal finances at risk, they will surely be looking for someone to blame.

 Are you paying attention, senators?

Peter Mahr of Southeast Portland is a family physician with Physicians for a National Health Program.

Dec. 31 (Bloomberg) — The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little.

More than 3,000 patients eligible for Medicare, the government’s largest health-insurance program, will be forced to pay cash if they want to continue seeing their doctors at a Mayo family clinic in Glendale, northwest of Phoenix, said Michael Yardley, a Mayo spokesman. The decision, which Yardley called a two-year pilot project, won’t affect other Mayo facilities in Arizona, Florida and Minnesota.

Obama in June cited the nonprofit Rochester, Minnesota-based Mayo Clinic and the Cleveland Clinic in Ohio for offering “the highest quality care at costs well below the national norm.” Mayo’s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians, in a telephone interview yesterday.

“Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” said Heim, a family doctor who practices in Laurinburg, North Carolina. “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.”

Medicare Loss

The Mayo organization had 3,700 staff physicians and scientists and treated 526,000 patients in 2008. It lost $840 million last year on Medicare, the government’s health program for the disabled and those 65 and older, Mayo spokeswoman Lynn Closway said.

Mayo’s hospital and four clinics in Arizona, including the Glendale facility, lost $120 million on Medicare patients last year, Yardley said. The program’s payments cover about 50 percent of the cost of treating elderly primary-care patients at the Glendale clinic, he said.

“We firmly believe that Medicare needs to be reformed,” Yardley said in a Dec. 23 e-mail. “It has been true for many years that Medicare payments no longer reflect the increasing cost of providing services for patients.”

Mayo will assess the financial effect of the decision in Glendale to drop Medicare patients “to see if it could have implications beyond Arizona,” he said.

Nationwide, doctors made about 20 percent less for treating Medicare patients than they did caring for privately insured patients in 2007, a payment gap that has remained stable during the last decade, according to a March report by the Medicare Payment Advisory Commission, a panel that advises Congress on Medicare issues. Congress last week postponed for two months a 21.5 percent cut in Medicare reimbursements for doctors.

National Participation

Medicare covered an estimated 45 million Americans at the end of 2008, according to the Centers for Medicare & Medicaid Services, the agency in charge of the programs. While 92 percent of U.S. family doctors participate in Medicare, only 73 percent of those are accepting new patients under the program, said Heim of the national physicians’ group, citing surveys by the Leawood, Kansas-based organization.

Greater access to primary care is a goal of the broad overhaul supported by Obama that would provide health insurance to about 31 million more Americans. More family doctors are needed to help reduce medical costs by encouraging prevention and early treatment, Obama said in a June 15 speech to the American Medical Association meeting in Chicago.

Reid Cherlin, a White House spokesman for health care, declined comment on Mayo’s decision to drop Medicare primary care patients at its Glendale clinic.

Medicare Costs

Mayo’s Medicare losses in Arizona may be worse than typical for doctors across the U.S., Heim said. Physician costs vary depending on business expenses such as office rent and payroll. “It is very common that we hear that Medicare is below costs or barely covering costs,” Heim said.

Mayo will continue to accept Medicare as payment for laboratory services and specialist care such as cardiology and neurology, Yardley said.

Robert Berenson, a fellow at the Urban Institute’s Health Policy Center in Washington, D.C., said physicians’ claims of inadequate reimbursement are overstated. Rather, the program faces a lack of medical providers because not enough new doctors are becoming family doctors, internists and pediatricians who oversee patients’ primary care.

“Some primary care doctors don’t have to see Medicare patients because there is an unlimited demand for their services,” Berenson said. When patients with private insurance can be treated at 50 percent to 100 percent higher fees, “then Medicare does indeed look like a poor payer,” he said.

Annual Costs

A Medicare patient who chooses to stay at Mayo’s Glendale clinic will pay about $1,500 a year for an annual physical and three other doctor visits, according to an October letter from the facility. Each patient also will be assessed a $250 annual administrative fee, according to the letter. Medicare patients at the Glendale clinic won’t be allowed to switch to a primary care doctor at another Mayo facility.

A few hundred of the clinic’s Medicare patients have decided to pay cash to continue seeing their primary care doctors, Yardley said. Mayo is helping other patients find new physicians who will accept Medicare.

“We’ve had many patients call us and express their unhappiness,” he said. “It’s not been a pleasant experience.”

Mayo’s decision may herald similar moves by other Phoenix- area doctors who cite inadequate Medicare fees as a reason to curtail treatment of the elderly, said John Rivers, chief executive of the Phoenix-based Arizona Hospital and Healthcare Association.

“We’ve got doctors who are saying we are not going to deal with Medicare patients in the hospital” because they consider the fees too low, Rivers said. “Or they are saying we are not going to take new ones in our practice.”

To contact the reporter on this story: David Olmos in San Francisco at dolmos@bloomberg.net

Baptist St. Anthony’s Health System was selected Tuesday to be the exclusive provider of hospital services to Amarillo municipal employees, a right held for more than two decades by the system’s chief competitor.

 The Amarillo City Commission unanimously voted to approve an acute care hospital services agreement with BSA, which narrowly bested Northwest Texas Healthcare System in competitive bidding for the work.

The city of Amarillo spent about $4.5 million last year on acute inpatient and outpatient hospital care for the estimated 4,300 employees, retirees and dependents enrolled in its self-insured medical plan, consultant Neal Welch said.

The proposal BSA tendered for an exclusive contract could result in a savings of $400,000 to $500,000 a year, said Welch, who spent the past two months assisting city administrators in evaluating the two hospitals’ offers.

The contract with BSA will take effect Friday and last one year, with the possibility of four subsequent one-year extensions.

Only 4.3 points separated the two hospitals’ proposals in scoring used by Welch and city staff to compare the proposals. The scoring method took into account such things as the prices the hospitals offered for types of services and the range of services to be included in the proposals, Welch said.

Northwest didn’t ask for exclusivity in its offer, Northwest representative Melanie Dennis said, in questioning the scoring method used to make the decision.

Rather, Northwest proposed that the city use both facilities and allow its medical coverage plan participants to choose which hospital they would use at the beginning of the health plan year.

“For a four-point value difference, you’ve chosen one hospital,” Dennis said.

“Also we’re looking at the savings too,” Commissioner Madison Scott replied.

BSA tendered both a nonexclusive offer and an exclusive offer, with the potential of exclusivity resulting in better proposed prices, said Welch said.

“We do not demand exclusivity in any way,” BSA Director of Managed Care Collin Hays told commissioners. “We had a nonexclusive proposal (submitted to the city), but it wouldn’t provide the savings.”

The nonexclusive contract offer from BSA still scored higher than the Northwest proposal in the evaluation.

Trauma services that Northwest provides that aren’t offered by BSA were accounted for in the scoring method, Assistant City Manager Dean Frigo said.

Northwest will continue to provide trauma services, but city health plan participants will be transferred to BSA if they are hospitalized or scheduled for outpatient services, Welch said.

“This has been a good process that we’ve gone through, with the two hospitals playing by the same rules, competing for the city’s business,” Commissioner Jim Simms said. “We appreciate greatly what the hospitals have done and the numbers that they put forward.”

Editor’s Note: The City of Amarillo is well known in the insurance industry as a trailblazer in stablizing their group medical costs. Jim Parrish, Dean Frigo, John Ward are three individuals who could teach the big insurance consulting firms a thing or two.  If those three ever decide to open up an insurance consulting firm, they would no doubt help other Texas political subdivisions millions of dollars.

Dallas, TX (PressExposure) February 20, 2009 — U.S. Risk Underwriters, a subsidiary of U.S. Risk Insurance Group, Inc. (www.usrisk.com), the fifth largest managing general agency in the nation, announced the launch of a new professional liability product for the medical tourism industry called MedTour Pro for Employers.

MedTour Pro for Employers is designed for companies who provide freedom of choice to their employees, including an option to obtain medical services outside of the United States. Coverage is for damages caused by any actual or alleged negligent act, error or omission by the insured while providing options for medical tourism services.

“We are the first to market with a product specifically designed for employers,” said Art Seifert, President of U.S. Risk Underwriters. “MedTour Pro for Employers enhances our suite of products designed specifically to cover the risks inherent in the dynamic new industry, predicted to generate $100 billion in revenue by 2012.”

Currently the only provider of Professional Liability for medical tourism facilitators and for employers, U.S. Risk is on the cutting edge in providing important coverage for this rapidly growing industry. Its travel and complications coverage for medical tourists is tough to beat.

MedTour Pro for Employers is written with an A.M. Best “A” rated carrier on a claims-made basis. Limits are offered up at $1 million with a minimum premium of $5,000. Excess over the $1 million limit is available.
Agents and brokers should contact Lorna Greenwood at 1-800-232-5830 or lornag@usrisk.com.

About U.S. Risk Underwriters, Inc.

About U.S. Risk Insurance Group

U. S. Risk Insurance Group, Inc. (http://www.usrisk.com) is a specialty lines underwriting manager and wholesale broker headquartered in Dallas. Operating 11 domestic and international branches, it offers a broad range of products and services through its affiliate companies, which include U.S. Risk Underwriters, U.S. Risk Brokers, Lighthouse Underwriters, LLC, Boston Insurance Brokerage, Inc., Professional Claims Managers, Omnisure Consulting Group, NCG Professional Risks Ltd. (London), and NovaPro Risk Solutions, LP.

SPBA Email Alert – December 28, 2009

Health Reform Insights & Talking Points 

By SPBA President Fred Hunt

I feel like the weatherman being asked to give a specific forecast of the weather a few years from today.  My forecast is below, but let me save your sanity by first explaining what will be playing out when/if a bill passes.   As I pointed out in my last e-mail, there are about 100 factors and processes which can change what you think you see ….even when/if the law is passed, and we all sit with printed copies in front of us and experts analyzing the actual words.

An example arose today.  A year ago, the Defense Authorization Act included what seemed like iron-clad wording that would ease and extend government medical care for wounded soldiers.  It was crystal clear.  However, a year later, the Defense Department has “interpreted” the law to deny many veterans the health services they thought the law promised, especially for Post-Traumatic Stress Disorder (PTSD).  The new interpretation decided to limit care only for things that can be proved to have happened during “armed conflict” in combat zones. This move is a blatant way to avoid paying for an expensive group of veterans and leave them uninsured or a burden on employer plans. (This is also yet another lesson for those who think government health care is embracing & caring.)

I mention this new development for two reasons:  First, as a heads-up that if this new interpretation stands, your plans may find that costs attributable to PTSD which everyone thought were covered by the clearly-stated law and Congressional intent may well apply to people who left the service after the Oct. 14, 2008 date of the Chu memo which arbitrarily changed the impact of the law. (No need for action yet, since there is an uproar of veterans groups demanding Congress return to its promise.)

My other reason for mentioning this news is that it shows how something you read in any final health reform law can have a very different real-world impact.  There is already some conniving going on behind closed doors in Congress to pull off some of these.  So, don’t drive yourself nuts to get the final language, and then assume that what you see is what you get.

The actual language of any bill will have hidden zingers.  Then, the Congressional staff draft what is called “the blue book”, which are essentially notes to give reg-writers background and “Congressional intent”.  The blue book often pictures things differently or with added pieces that you don’t see in the legislative language.  Then come the interpretations which the applicable upper-level Agency officials decide to make (like the Defense Department example).  Then come the nitty-gritty interpretations as the actual reg-writers create the regs with which we must comply.   Zingers can sometimes take a decade to emerge.   (If you are growling about the people who influence these interpretations, let me point out that  everyone who has attended an SPBA Spring Meeting has shaped law & policy effectively and constructively, and SPBA acts as a reality-check truth squad whenever possible in the rest of the process.  Please mark your calendar for the SPBA Spring Meeting April 14-16, 2010 in Washington DC to again steer policies towards common sense.)

So, it is fine to check the Library of Congress official legislative website at http://loc.thomas.gov   as often as you want.  You can also read and hear all the interpretations, but the absolute specifics of how things would work would evolve over several years.  In the case of this law, I think that the legislative tussle will also go on for several years, with each side trying to slip in later what it did not get in this first round, and parts even being negated or repealed.

MY FORECAST:

So, with all those caveats & explanations, let me share my thumbnail sketch of how I think our self-funded employee benefit market will be impacted.  (At some later date, I’ll tell you how the attendees of the 2009 SPBA Spring Meeting, and some phenomenal work by several SPBA members steered history and make this a fairly upbeat report.)

Employee benefit plans in general and self-funding were never a target (except, of course, for the hard-core single-payer advocates).  So, I think that we will be relatively unscathed (meaning less than could have been, and than many feared).   I think most problems will be TPAs & self-funded hit as unintended bystander victims of the punitive measures being thrown at insurance companies.  There is nothing designed to subvert your client plans or lure people away.

I THINK THERE WILL BE SOME GOOD THINGS for your client plans.  For example, I think:

>>More young & healthy individuals who, today, who opt out of employer plans because they feel they don’t need health coverage will be in the plan because of the direct or indirect  pressure to be insured.  Some plans suffer badly today from young healthy eligible individuals who decline coverage.  Employers will take a more energetic role in being sure their workers are in the plan, because one probable provision would wallop employers with a fine for $750 per-employee fine if even one ends up getting a government subsidy instead of an employer plan.

>>It will be harder for employers to “go bare” and not have a health plan, so that stabilizes and expands your market.

>>The medical cost “discount” headache looks like it will have a path to ending.  If there is an insurance exchange, public option or whatever in which the government (federal Office of Personnel Management – OPM –  is in the bill) negotiates with doctors & hospitals for a price formula, then I think TPAs and others will adopt that as the de facto Usual & Customary.  This is different than basing on the Medicare price, because back-room deals in 1965 recognized Medicare & Medicaid as a special situation helping the old & needy.   The new public exchanges would negotiate a presumably-fair price for regular people, so it would be hard for doctors & hospitals to say that a negotiated price for regular people is not fair for your plan participants.  The government won’t automatically extend their price to you, but, at last, a credible price list, the same as insurers’, would be available.

>>If the “Cadillac” plan tax remains, cost-efficiency in design & operation of plans will be a gigantic plus.  This has always been a forte of TPAs.

>>There will be changes in the health insurance companies.  Some markets (such as individual policies) might well become money-losers and be dropped.  Insurers may well decide that they want a less-direct role, be it more Stop-Loss or new arrangements with TPAs or whatever.  Meanwhile some non-profit Blues and others will get advantages over for-profit insurers.

>>Some SPBA members have told me that they are already spreading the word among current and prospective clients that no matter what happens and how long it takes to unfold, their TPA (as part of a nationwide network of SPBA members sharing insights & experience) will be on the cutting edge of both the visible and invisible developments.  With insurers and others facing turmoil within their arena, he says that clients and prospective clients are reacting very positively.

SPBA’s ROLE & GOAL will be to work with you day by day to maximize your options as all this evolves.  Unfortunately, in a few days, some SPBA TPA firms will be past-due on their dues & membership renewal forms, and cut off from the services they need.  It is a shame.  TPAs who pride themselves on processing claims in a few days have failed to process SPBA’s simple form in the past 45 days.  Some say “it never arrived”, but it was sent first class mail and not returned.  So, if you think it never arrived, do a thorough investigation of your mail room for what else has been lost.  For some of the excellent individuals who will be dropped in a week, we will miss you, and we strongly encourage you to arrange to get compliance and industry trend services from somewhere.  Sadly, most firms that go it alone lose clients and fade away or end up in deep legal & financial trouble that reflects badly on the whole industry,

For the members who have paid & renewed on time.  Thank you, and stay-tuned.  This will be an exciting time with both frustrations and the biggest opportunities in decades.

Happy New Year.

Fred

Coming soon – a new health plan designed for the young and healthy, generally for those age 35 and younger. Pay only $62.50 per month, or $750 per year to the United States Government – should you subsequently become ill, or need major surgery, you will automatically have the right to apply and be accepted for real health insurance that will cover all pre-existing conditions immediately. After recovering  from your illness and/or surgery, you may drop your real health insurance policy and continue to pay only $62.50 per month until you need real health insurance again!  Pay for real health insurance only when you need it! What a novel idea! Why didnt we think of this before?

Editor’s Note: The communists in Washington know exactly what they are doing with health care reform. They are just about as dumb as a fox – health care reform as now envisioned is doomed to failure and they know it – nothing in the bill addresses health care costs, nothing at all. In fact, components of the health care bill are intended to drive costs up to new highs, and fast. We expect group health insurance costs to increase dramatically in 2010. With the resultant “failure” of private insurers to reign in health care costs, the communists will use that failure as an excuse to create a single payer system. The communists have set the stage for failure – a clever strategy it seems.

We would not be surprised at all if some major health insurance companies exit the business in favor of more lucrative and less government controlled insurance markets.

See Dick Morris article here – http://www.dickmorris.com/blog/2009/12/22/day-one-how-obamacare-will-alienate-americans/#more-694.

Dr. Rene Perea, FACS, Fellow American College of Surgeons – General and gastrointestinal surgeon advertises services and prices here – http://gastrocirugia.com.mx/obesity/. His office is 15 minutes from our office in Brownsville, Texas.

Editor’s Note: The prices shown on the website are probably negotiable. For example, we know of a patient from Houston who flew down to Brownsville to seek a gastric by-pass in Matamoros. He negotiated a turn-key price of $3,500. We helped get a price for a San Antonio client recently for $4,500 all inclusive. Potential candidates for these surgical procedures may be wise to offer similar cash offers to US based physicians first. It may be difficult for a surgeon / surgical center to turn down a cash offer of $5,000 here in the United States.

The most interesting paragraph in this article – http://www.2theadvocate.com/news/78937392.html – is the following:

“The health system would be happy to consider little or no increase if the resulting savings went to patients and their employers rather than Blue Cross, Finan said. Blue Cross had indicated it will increase premiums by 9 percent to 10 percent in 2010.”

Is this a clue that some carriers do not pass on 100% of the discounts to the consumer, but instead retain a portion of the discount as an additional revenue source? We think this is a very strong clue, coming from a hospital administrator.

Harry Reid and his fellow communists passed the Senate version of the health care reform Bill today despite  polls which show that a majority of Americans are strongly opposed to this new entitlement program.

  New Symbol of American Greatness?

December 23, 2009

The Securities and Exchange Commission filed securities fraud charges against an Austin, Texas investment advisor and two of his businesses alleging he conducted a “multi-million dollar scam” that used former professional football players to promote its offerings.  

The SEC alleged in a filing Tuesday that Kurt B. Barton and Triton Financial LLC, raised more than $8.4 million from approximately 90 investors by selling “investor units” in an affiliate, Triton Insurance, and telling investors that their money would be used to purchase an insurance company.  

The SEC alleged that Barton, who is chief executive officer of Triton, instead used the funds to pay day-to-day expenses at Triton Financial and its affiliate. Triton co-sponsors the Heisman Trophy Trust, an organization that annually honors the best player in college football.

According to the complaint, which was filed in federal court in Austin, Triton used former football players as well as stockbrokers and other salesmen to promote securities and recruit potential investors.  The investment advisory firm, which according to its Web site invests in real estate and manages the securities portfolios of athletes and other clients, has raised more than $50 million for at least 40 ventures since 2004, according to the complaint.

Toby Galloway, a regional trial counsel in the SEC’s Fort Worth regional office, said that the former players aren’t facing any charges right now, but the SEC continues to “look at everyone involved.”

“There is no doubt that having these gridiron greats out there selling these investments certainly played a role in Barton stiff arming money from investors,” he said.

Former Heisman Trophy winners Ty Detmer and Chris Weinke work for Triton along with Jeff Blake, a former NFL quarterback Blake who directs Triton’s “athlete services” department, which is a marketing arm for Triton that recruits players as clients.

“By associating with former football stars, they were able to build a facade of legitimacy and gain investor trust,” said Rose Romero, the director of the SEC’s Fort Worth regional office.

Barton and Triton, which has been registered with the Texas State Securities Board as an investment advisory firm since June 2006, have consented to court orders freezing their assets.  

According to an emailed statement from Barton’s attorney, Joe Turner, Barton “has voluntarily consented to the appointment of a receiver. He intends to work closely with the receiver in an effort to ensure that the investors, many of whom are friends and relatives, do not lose their money.”

In March, Sports Illustrated published an article that described how Triton used former football players to promote its business. Following the article, the Texas State Securities Board conducted an examination of the company. According to the SEC’s complaint, Barton and Triton provided the Texas State Securities Board “with altered and fabricated documents during the examination that followed the article’s publication.

The SEC charged Barton and Triton with securities fraud and seeks permanent injunctions, disgorgement of illegal gains and financial penalties.  The regulator also wants an asset freeze and a receiver over defendants’ assets and operations.

Commander in Chief B. Hussein Obama continues to exhort his base with weekly emails. Below is an exerpt of his most recent email to the masses:

“As with any legislation, compromise is part of the process. But I’m pleased that recently added provisions have made this landmark bill even stronger. Between the time when the bill passes and the time when the insurance exchanges get up and running, insurance companies that try to jack up their rates do so at their own peril. Those who hike their prices may be barred from selling plans on the exchanges.”

“And while insurance companies will be prevented from denying coverage on the basis of pre-existing conditions once the exchanges are open, in the meantime there will be a high-risk pool where people with pre-existing conditions can purchase affordable coverage.”

“A recent amendment has made these protections even stronger. Insurance companies will now be prohibited from denying coverage to children immediately after this bill passes. There’s also explicit language in this bill that will protect a patient’s choice of doctor. And small businesses will get additional assistance as well.”

“These protections are in addition to the ones we’ve been talking about for some time. No longer will insurance companies be able to drop your coverage if you become sick and no longer will you have to pay unlimited amounts out of your own pocket for treatments that you need.”

Editor’s Note: Hussein knows that with the passing of the Health Care Reform Bill, insurance rates will necessarily rise. And rise sharply. A Wellpoint study confirms this, with group health rates going up as high as 100% to cover new mandates such as pre-existing conditions prohibition, tier rating basis, community rating, etc. He is preparing his base for the next battle – eviserate health insurance companies so that all will exit the market and a national single payer plan will be required. With only four major health insurance companies left in the national marketplace, it is not unreasonable to believe that they will change their business model from health care to property & casualty cover.

If health insurance companies are so bad, making obscene profits at the expense of the sick, why are there only 4 major players left in the market? And, is a 3-5% profit margin obscene? There are several thousand insurance companies in the United States, and 99% of them dont mess with health insurance. There must be a reason why.

The 2,000 page plus monstronsity of a Bill has probably not be read by too many people, especially those idiots in Congress who voted for it. Under “Wellness and Prevention Programs” section, gun control is addressed. The Secretary of Health “may not” (as opposed to “is prohibited”) from collecting data on who owns a gun, etc. So, what other “data” is big government to be empowered to collect about us, common citizens?  This is Orwellian – HealthCare Bill – Firearms

If you think this is “fishy”, it is your responsibility to report this to the White House at flag@whitehouse.gov . Also, if you overhear any of your neighbors speak critically of the Democrat Party, please call Harry Reid or Nancy Pelosi immediately. You will be rewarded.  

Yesterday, President Obama signed into law H.R. 3324, the Defense Appropriations Act that included a provision to extend federal COBRA premium subsidies.  Currently, it applied to those that involuntarily lost their coverage and were eligible for COBRA to 12/31/09.  The extension makes that timeframe 02/28/10.  It also extend the time period for which a subsidy can be given from 9 months to 15 months. In addition, the legislation would give beneficiaries whose subsidy expired and who didn’t pay the full premium the opportunity to receive retroactive coverage. For example, a beneficiary whose nine months of subsidized coverage ran out November 30 and who didn’t pay the unsubsidized premium for December could pay his or her 35 percent share in January and receive COBRA coverage for December.  The legislation makes clear that employers can offset future COBRA premiums or issue refund checks for beneficiaries who overpaid their COBRA premium. That could happen if a beneficiary whose subsidy ran out in November paid the full premium rather than the 35 percent share in December.

 There are additional notification requirements for those who formerly, currently, or prospectively elect COBRA continuation.  The Department of Labor has not published a model notice yet. 

COBRA subsidy expansion from HR 3324

www.notintexas.org is calling for a rally on the south steps of the Capitol in Austin, Texas, 16 January.

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.