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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 February 2004 Issue

CNA has closed the sale of its group benefits business to Hartford for $500 Million. The sale included group life, AD&D and short and long term disability coverage. CNA’s LTC and specialty medical business were excluded form the sale.

Jardine Lloyd Thompson has bought the business portfolio of HCC Employee Benefits.

In contrast to some other disease management studies, a study by Accordant (Advance PCS) showed that they were able to lower costs by 24% over two years compared to plans without disease management.

Cigna is laying off more people in management in an attempt to keep health operations profitable. Rumor said 10% of the company’s nationwide workforce of just over 33,000 could be cut and compensation plans for employees are being revised. Cigna had projected a 10%-11% drop in membership in 2003 with a loss of another 6%-7% as of January 1, 2004. Much of this is viewed as an extended bomb from Cigna’s claim system change that cost many customers due to the service problems that inevitably result from such a change. Has a claim system conversion ever gone smoothly in the history of group benefits?

Unicare has announced no increase in rates for the 1st quarter of 2004 for groups of 51-99 employees.

Medco renewed its PBM contract for Rx with United Health Group. The contract is said to be worth $7 Billion in 2004. The contract is worth approximately 18% of Medco’s business. UHC covers approximately 18 million people.

Aetna continues to grow its network in Chicago by adding Rush Systems for Health, the Dreyer Clinic and Elmhurst Memorial hospitals and doctors to their network.

Jefferson Pilot has agreed to buy various US businesses from Canada Life (which was earlier sold to Great West).

PHCS has renewed their contract with Rush Systems, keeping them in the network.

When it comes to HSA plans, the IRS has issued guidance that there is no requirement for third party claims adjudication. According to the IRS, whether or not you are spending HSA "money on health expenses is between the taxpayer, God, and the IRS." This is apparently finally an acknowledgement from the IRS that they are not God. The announcement will probably give pause to some employers in whether they wish to contribute to HSA plans. Also, for individuals enrolled for family coverage, the plans allowed for HSAs will not allow individual reimbursement before the family deductible is satisfied (same as MSA plans). Also, unlike FSAs, individuals will not be allowed to withdraw funds in advance of deposit for qualified medical expenses. The funds must be deposited prior to withdrawal.

UHC has announced that it will not renew more than 18,000 individual policies in Missouri, Kansas, Illinois and Florida. They will offer those people the opportunity to purchase individual insurance through their newly acquired Golden Rule Insurance Company that has about 400,000 individual policies in force. Most terminated policies are HMO. There is bound to be some serious shock in benefits for these people, if they can get coverage after being re-underwritten. Meanwhile UHC has reported a 34% jump in quarterly earnings.

Fun facts and reasons for road rage- One survey says that 64% of adults in the US are either overweight or obese. Also, 77% of people with hypertension do not have it under control. 50% of people with depression stop taking their medication within the first month and only 21% of diabetics have had all five recommended health tests in the last two years. Another survey states that 17.6% of outpatient visits are for non-illness care, while 37% are for an acute problem and 36% are for chronic routine problems and flare- ups. From 1997 through 2000 ER usage increased by 14%.

SHRM says that satisfaction with health plan offerings is 67% at over 500 employee organizations, 62% at medium sized companies and 38% at small companies (1-99 employees).

The FDA says that during a recent blitz against illegal drugs imported form Canada, nearly all of the 2000 packages inspected contained foreign versions of medications not approved in the US.

The US Chamber of Commerce reports that benefits cost 42% of payroll in 2002. Medical benefits in particular were 15% of payroll in 2002. The survey by the Chamber consisted of 400 employers.

Monthly total retiree coverage costs according to Hewitt/Kaiser survey of 400 employers of at least 1000 employees: Pre-65 single-$467, with spouse-$845. Post 65 single was $212 and the cost including spouse was $419.

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