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

Why be like everyone else?

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

Volume 4 Issue 8 Street Talk December, 2002 Issue


Blue Cross/Blue Shield of Illinois has reached an agreement with Advocate Healthcare in Chicago. The fight over discounts and the eventual reconciliation were heavily publicized, but we also hear that the agreement does not cover members of the Blue Advantage HMO plans.

Warren Buffett has reportedly made an offer to purchase GE’s Employer’s Reinsurance Corp. The deal would make Buffett’s Berkshire Hathaway the largest reinsurer in the world by surpassing Munich Re and Swiss Re.

Oregon voters were smart enough to turn down by an overwhelming margin (80% to 20%) an initiative to make Oregon the first state to offer "free", tax-financed medical care for everyone.

According to a Commerce Clearing House survey, the average per employee per year cost of absenteeism is $789. The survey of 333 HR executives found that 33% of their employees cited personal illness for absence, while 67% cited other reasons including stress, family issues and personal needs.

TPA SHPS has entered a merger agreement with eBenX, Inc (the on-line broker). Fiserv Insurance Solutions Group announced that it acquired the life and health TPA business of Willis Group. Word is that this was a technology merger due to the Willis TPA’s inability to keep up with the technology needs of today’s health business. Wausau Benefits has acquired the retiree benefits administration operations of Marsh and the renewal rights to 28 of those customers.

Although hospitals dispute the study, Blue Cross Blue Shield Association reports that 79% of total health care costs are attributed to hospital and physician costs. Of that, 19% of the costs are associated with medical technology and 18% results from the elimination of competition through provider consolidation. AdvancePCS reported that Rx costs have increased nationally by 17% in the last year.

Cigna’s profits have plunged since May and share values have been cut by two-thirds. Chairman Ed Hanaway blamed "poor execution", "pricing misjudgments" and computer glitches in the introduction of a new claim system. Cigna is also taking a charge of $50-$65M in the class action suit against them for arbitrarily cutting claims for doctors and hospitals. Given their current financial picture, they probably decided it was better to settle than fight. Of course, Cigna admits no wrong in the settlement.

The FDA allowing Claritin to be sold over the counter will reduce Rx costs. The drug will then no longer be covered by Rx plans. The change is anticipated for January 1st.

The Segal 2003 trend survey of carriers for plans with Rx shows 14.5% for PPO, 14.9% for POS, 14.4% for HMO, 16.2% for non-network fee for service and 15.9% for high deductible plans. Rx trends made up approximately 1.3% of the total trend figures. Stand-alone trend for Rx retail averaged 19.5% with mail order at 18.9%. Indemnity dental trend is projected at 7.8%, Dental PPO at 6.5% and DHMO at 6.0%. Trend figures are annual, but when applied to experience, trend is greater. This is because trend is multiplicative and is figured from the midpoint of the experience period carriers are looking at to the mid-point of the renewal period. Thus, since renewals are projected early, actual trend used in renewals is more than the annual figures quoted here. Trend consists of such items as medical price inflation, deductible and copayment leveraging and cost shifting. Trend is not reflective of employee contribution rate increases, plan design changes and demographic changes.

The DOL is calling for implementation of Association Health Plans to expand health care coverage for small groups. The DOL asserts that AHPs would lower average premiums by 13% and insure an additional 2M people. Much of the reduction is to be obtained by making the plans exempt from state laws. The DOL also predicts substantial administrative cost savings. However, the DOL push for AHPs is somewhat of a pipe dream. Associations that would offer the plans would have to meet strict financing requirements and reserve requirements that most could not meet. In addition to normal reserves, the AHP would have to set aside an additional $500K to $2M reserve. If an association could meet those requirements, most could already be offering self-funded MEWAS. In addition, the AHPs would have to comply with HIPAA, meet certain bonding requirements (for failure to fund claims) and pay assessments to a DOL maintained AHP fund that would allow for takeover of failed AHPs. This call for AHPs and the attending requirements shows how little the DOL understands the funding of health insurance.

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