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S&S Benefits.....Opinion, Hearsay & News Review

S&S Benefits Consulting, Inc. 219 Darien, Dundee, IL 60118 Phone: 847-428-5353, Fax:847-428-9876,

Email: jseiler@ssbenefits.net www.ssbenefits.net April 2004 Issue

The IRS has clarified COBRA further. COBRA participants may not be terminated for insufficient premium payments that are deemed insignificant. A shortfall is defined by the IRS as insignificant if it is less than or equal to the lesser of (1)$50 or (2) 10% of the amount of premium the plan requires to be paid. Also, for shortfalls, the plan must notify the beneficiary of the shortfall and give the person a "reasonable period" to make up the difference. A period of 30 days after the shortfall notice is considered a "reasonable period." EBIA says that it appears a shortfall notice can be sent immediately when a partial payment is received, rather than waiting until the end of the normal 30-day grace period.

The total health benefits cost per active employee including dental and other benefits was $3,644 in 1994 and was $6,215 in 2003, an increase of 70.5% according to Mercer. In 1999 the health spending per capita figure for the U.S. was $4,358 vs. $2,463 in Canada according to the Organization for Economic Cooperation and Development. The OECD said that the U.S. spends 13.9% of GDP on health care as of 2001. In 2002, PricewaterhouseCoopers found that litigation, mandates and fraud drove 27 cents of every new dollar in health spending in the US. Canada is experiencing double digit increases in benefit costs according to a BI article. The main area of concern is healthcare costs. Private payers pay for 30% of Canadian healthcare expenses on a direct basis. Through taxes (despite what some would believe, it isnít free!) the provincial governments pay 70% of the health costs of primarily physician and hospital expenses. The largest expense increase appears to be prescription drugs. Imagine that!

According to Thompson Media, Samís Club is offering group insurance plans to small business. We heard they were right next to those giant bottles of Tide.

Paul Fronstin with EBRI doubts that in the long run consumer driven plans will reduce costs. His analysis says 22% of the population generates 77% of health spending and 50% of the population generates only 5% of the cost. More logic on why these plans will not reduce costs significantly in the long run is available on our website at www.ssbenefits.net under The Truth section.

SHPS has announced a merger with population management firm Landacorp of Atlanta. Multi-Plan has announced it has completed the merger with the network operations of BCE Emergis. Caremark Rx has completed their acquisition of AdvancePCS. North American Health Plans, who pays claims for Definity Health of MN is spinning off the group that pays Definity claims and is selling it to Definity. Safeco is selling its stop loss and life units to White Mountains Insurance Group and Berkshire Hathaway.

Humana announced in March that as of 4/3/04, their contract with University of Chicago Hospitals will terminate. As of 5/1 their agreements with Alexian Brothers and St. Alexis Hospitals will also terminate. In case you missed our special notice, Lake Forest Hospital kissed and made up with PHCS and will remain in the network.

Coresource has announced that their block of business health increases averaged 6.7% in 2003. The average insured benefit costs rose 15.6% in 2003 vs. 12.4% for self-funded groups in í03 according to Kaiserís annual study.

GM covers 1.2 million employees, retirees and their dependents and will spend $5.1 Billion on healthcare in 2003, more than for the steel on their cars!

Aetna has announced a strategy of going after Blue Cross clients (60 million members) in order to increase their own membership. They are targeting to grow their 13 million members by 500,000 to 700,000 this year. If you have a Blues plan you may want to see how committed Aetna is to their announced goal.

According to the BLS, hospital prices rose by 1.9% in January and were 5.7% higher than a year ago. Since 1995 the AHA statistics say that the average length of stay in hospitals has dropped from 6.5 to 5.8 days in 2001.

Illinois is considering a bill (HB 4549) that would authorize assessments on stop loss insurance to help cover the cost of the state high-risk pool (CHIPS) plan. Also, Illinois hospitals have agreed to provide "free" or discounted care to those with incomes of less that $18,850 per year.

Fidelity reports that total health costs will rise to $8,498 in 2004 from $7,713 in 2003 with workers paying 29% of the total cost in 2004. The Labor Department reports that the total cost of employee benefits averaged 30% of total compensation in 2003. A US Chamber survey said benefits costs were 42.3% of payroll with an average of $42,550 in total compensation in 2002. Health benefits averaged 15.2% of payroll in 2002 according to the Chamber.

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