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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 August 2004 Issue

The Bureau of Labor Statistics reports that benefits costs constituted 29% of compensation in March, up from 27% in 2001. Health benefits were 7.2% of compensation in March. Total compensation averaged $24.95 per hour while wages averaged $17.71. Total compensation for union workers averaged $31.94 per hour compared to non-union at $22.28.

A report in Health Affairs says that spending on inpatient hospital services rose 6.3% in 2003, while outpatient hospital care spending rose 11%. The rate of increase for both was lower than the rate of increase in 2002. The HSC reports that spending per privately insured American slowed from 9.5% in 2002 to a 7.4% increase in 2003. The HSC reports the key long-term driver in medical cost trends is technology.

The IRS has issued guidance on HSA plans, which clarifies such items as the definition of preventive care. The IRS will also allow exceptions to the rules as to what qualifies as a high deductible plan for compliance with state laws (until January 1, 2006). For instance, if a state law required no deductible and 100% benefits for hospice care, a high deductible HSA plan would still be allowed. The guidance is designed to give state lawmakers time to bring their laws up to date to accommodate the HSA plans. Good Luck!

According to a survey from a national staffing company, the top five reasons people stay in jobs are: Being well paid, liking their coworkers, having job security (seniority), having good benefits and being used to the job. The top 5 reasons for leaving are: More money (surprised?), better benefits, more opportunity for career growth, less stress or pressure and wanting a change of pace.

A diabetes disease management program through Cigna and American Healthways on 43,000 participants saved 8.1% on medical costs for those enrolled in the program for at least 10 months according to the July/August issue of Health Affairs. Decreased hospitalizations generated most of the savings, even though prescription costs rose.

Millimanís 13th annual preliminary survey of HMOs showed expected 2005 rate increases of 11%. Their new PPO survey showed expected increases of 12% for PPOs.

The BC/BS Association estimates that fraud cost U.S. insurers $85 billion last year. Thatís 5% of the $1.7 trillion spent on healthcare nationwide in 2003.

A recent article in Business Insurance was somewhat misleading. While discussing stop loss insurance rate increases, the article mentioned rates for CDH plans that are 5%-10% below average. This is simply not true in our opinion or in the opinion of several stop loss carriers we surveyed (just to be sure they hadnít lost/changed their minds). The estimated attachment points may be reduced for CDH plans, but the larger share of stop loss cost is in the specific stop loss coverage. Rates for that coverage are not influenced by CDH plans. Shopping the specific, lasering and raising the stop loss deductible are the most common forms of mitigating rate increases for that coverage.

A recent informal survey in Benefit News Connect showed that HR professionals generally gauge success differently from CFOís. 71% of those surveyed said the two had different priorities and only 7% said both were on the same page. Given todayís costs, we find that somewhat surprising.

There is a new tool, though somewhat limited, available on the Internet. At www.qualitycheck.org there are reports on 16,000 JCAHO accredited organizations. Hospital quality can be compared in 4 categories for those hospitals that participated. However, hospital officials were allowed to choose to use only two of the 4 measures to include in the on-line tool. Although the tool is very limited, it appears to be a step in the right direction.

A.M. Best reports that a shakeout may be coming in the Long Term Care market. Aegon (Transamerica Occidental, Monumental and Life Investors) is reported to begin ceasing the writing of new policies in January 2005. Also reported is that GE Financial spin off Genworth had a 34% drop in LTC sales in the second quarter. Best notes that a number of companies are rethinking their commitment to the market. Given the dire statistics used to sell the product, we have always wondered how the premiums for the product could be both affordable and sustainable for the long term.

The California insurance commissioner rejected the Wellpoint Anthem merger application.

According to Benefit News Connect, the HSC reports skepticism about the ability of CDH plans to control costs after ongoing interviews with employers in 12 communities. However, due to the buzz from vendors and consultants, many are offering the plans even though the numbers they crunch are not showing the results that were intended.

If you know someone in your organization or another company that would find this newsletter useful, please send us their name and email address and we will forward them a copy at your request.

STREET TALK-WHY BE LIKE EVERYONE ELSE?