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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 click: mailto:jseiler@ssbenefits.net                                                    http://www.ssbenefits.net/          August 2005 Issue

UnitedHealth Group has inked an $8 billion agreement to buy Pacificare. The deal is expected to close in late 2005 or early 2006. The deal will require regulatory and shareholder approval. The deal helps United address the needs of older Americans due to PacifiCareís strength with the Medicare market.

The FTC and Evanston Northwestern Healthcare fight has had closing arguments and the FTC Administrative law judge is expected to rule by the end of the summer on the issue of whether the acquisition of Highland Park Hospital was anti-competitive. The FTC is trying to force ENH to divest the hospital. The FTC argued that the dealt to acquire Highland Park resulted in the raising of insurerís rate payments to the system by 40%-60% vs. prior annual increases of 4%-8%.

Fiserv has acquired another TPA, Administrative Services Group based in Lexington , KY. The TPA is more commonly known as Commonwealth Administrators. Fiserv already owns Benefit Planners, Benesight, Fiserv Health, Harrington Benefits and Wausau Benefits along with Avidyn Health. They continue to let the TPAs operate independently.

Speculation in Crainís July 11th edition portrays Hewitt as a possible takeover target. Since the stock has dipped 15% to $26, speculation is that a company such as IBM or HP may want to make a splash into HR Outsourcing on a relatively inexpensive basis. Hewitt employees and partners control 53% of the outstanding shares according to Crainís. The same article mentioned ACS buying a majority share of Mellonís HR Consulting unit and EDS (Ross Perotís company) buying a majority stake in Towers Perrinís HR unit. As we mentioned in an earlier item this year about these outsourcing companies, our personal experience shows that outsourcing the HR functions appears to be the way to go if you really dislike your employees.

The federal definition of marriage is the union between a man and a woman. This definition defines the tax consequences of an ERISA plan offering coverage for same sex domestic partners, regardless of state laws to the contrary. COBRA does not apply in the event of divorce or death of a same-sex spouse. Reimbursements from flexible spending accounts are only permitted for medical expenses of opposite sex spouses and legally dependent children. Pre-tax deductions must be treated as taxable income for same-sex spousal premiums and the employer portion of any employer contribution is not tax deductible unless the same sex spouse meets the legal definition of being a dependent. If a plan is self-funded and the same-sex spouse received benefits of $150,000 for something such as a kidney transplant- the entire $150,000 may become taxable to the employee. Just some notes for those employers considering adding this option.

According to a report by the National Center on Addiction and Substance Abuse at Columbia University , the number of Americans who admit abusing prescription drugs nearly doubled to over 15 million from 1992 to 2003. The study did not say if the measured stress level of employees had doubled over the same time period. Of course, we also never knew how much we had wrong with ourselves until we experienced all the drug company direct to consumer advertising.

Humana is converting its pharmacy claim processing from Caremark to Argus in September to avoid competing with the services of Caremark for processing claims on a self-funded plan. Humana members do not interact with either processor, since they are used solely for processing and data functions of Humana contracts. Humana says the process of change will be seamless and not affect employees or employers. When have we heard that before?

Express Scripts has announced that they are buying specialty pharmacy company Priority Healthcare for $1.3B. Blue Cross/Blue Shield of Tennessee has announced an agreement to purchase Gordian Health Solutions which provides disease management services.

The Association Health plan bill passed the U.S. House and awaits Senate action. Insurance carriers such as Blue Cross are lobbying against passage and TPA associations are lobbying for passage of the bill. Back in the 1980ís there were many of these types of plans. They were known as MEWAs (Multiple Employer Welfare Associations). Most states outlawed MEWAs on anything other than a fully insured basis, simply because so many of the plans failed. Most carriers will not write such plans on an insured basis (and there are far fewer carriers now than there were in the 1980s).  Many of the failures were due to corruption, or improperly underwriting and rating the plans. The failures had many companies scrambling to find insurance while their claims under the MEWA plans went unpaid. There are positives and negatives to these plans and perhaps they could succeed with proper regulation and watchful eyes on the funding and reserving, so it will be interesting to see how this plays out and who insures any such plans if the legislation passes.