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

Why be like everyone else?

This is the 36^th issue of our newsletter so it is our official 3^rd anniversary of having a little fun trying to keep you updated and informed about what is happening in the benefits business. We hope you have enjoyed it!

Certain Blues plans continue to grow by swallowing up other Blues plans. WellPoint (Blue Cross of California) announced that it intends to buy Maryland-based CareFirst (BC/BS of Maryland) for $1.3 Billion, but Maryland insurance regulators plan to spend as long as a year evaluating the ramifications of the sale before allowing it to go through. CareFirst needs to convert to for-profit status also (like any of these Blues organizations were every really non-profit!).

Another carrier has left. Trustmark has pulled out of writing new individual business. Hopefully they will get competitive again on their group plans after they blew it in the individual market by offering too much for too little.

Benefitnews.com reports that regional plans are leading a turnaround in the HMO market. Enrollment in HMOs increased by about 200,000 people between July 1, 2000 and January 1, 2001. Nine of the largest HMOs did show some growth but the other 16 fastest growing plans were not household names (for instance Indiana University Health plan). But HMOs, for the most part, have never really learned to manage growth. Look for fallout once the claims catch up.

It wouldn’t be a newsletter without something bad about Aetna. Crain’s reports that the relationship with Rush Systems in Chicago and Aetna has taken a turn for the worse with the five Rush hospitals pulling out after 4 months of unsuccessful negotiations. Aetna was also fined $1.15 million by Texas for slow claim payment. It appears all Texas insurance carriers are having trouble paying claims, since they have banded together to ask Texas to stop publishing the fine list. Included in the group not wanting publication are Blue Cross, Cigna and United Healthcare.

Farmers Insurance agents will begin offering Unicare (Wellpoint) individual and small group products in Texas, Illinois, Indiana and Nevada. Grab a health policy from an expert near you along with your car and homeowners insurance.

Major Houses Predict- Arthur Andersen and Segal say the health increase in 2002 will AVERAGE 12% for HMOs, 14% for PPOs and 16% for Indemnity. Hewitt predicts 18% for HMOs, 13% for PPOs and POS plans and 15% for indemnity plans. Just remember that this is AVERAGE. As one famous and wise group man once explained, "If your head is in the oven and your feet are in the freezer, on AVERAGE you should be comfortable."

Raytheon and a few other large companies are going to be offering the new employee directed (Consumer Driven-CD) healthcare plans (as an option) to their employees which include Personal Care Accounts (PCAs). This latest rage is just another method of cost shifting. Forgetting the tax consequences of the PCAs (employer verses employee contributions, etc), the idea is for those who don’t use medical services to be able to retain the money. Those who do use services will almost always be in a high deductible situation. These PCA accounts (like early HMOs) will be attractive to the young and healthy and split them off from the rest of the group when the CD plan is an option. Anyone ever heard of pooling? Those who are older and more needy in terms of medical services will be footing the bills and paying a lot more out of pocket and saving little to nothing in the PCAs. Will these plans be affordable to the 20% who incur 80% of the claims? Doubtful. Will there be some utilization reduction? Probably. Will these plans mitigate the driving costs of technology and the resultant large claims? No. Remember Federally Qualified HMOs getting in the door and siphoning off the good risks for a low rate a few years ago? This is very similar. Where are those rates now? See above (under Major Houses Predict).

While there definitely are a few good ideas coming out of these consumer driven plans, we wonder who is signing off on them. One local plan that has made a big splash is Destiny Health. Any broker or consultant in their right mind would have their client sign a full legal release from responsibility before offering the plan. Why? Errors and Omissions insurance usually does not cover B rated carriers, non-the-less a carrier that is not rated.

And what is all the hoopla about Defined Contribution (DC) health? More baloney that markets itself well. One insurance company says it will offer three or four options. The employer chooses how much they will contribute per employee per month. Big deal. By lowering the dollar figure and telling the employee to pick up the rest of the cost for the plan they want, all they are doing is creating a cafeteria plan. Those have been around for a while. This is nothing new. Read the fine print. The carriers still won’t write the contract unless the employer gets 75% participation. The news articles on these plans seem to have forgotten that the employer already chooses how much they’ll pay. If the employer doesn’t pay enough, the people won’t be able to afford the coverage and they’ll drop off the plan. Once you don’t have 75% participation, the carrier has the right to stop providing insurance. So they stop.