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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 July 2004 Issue

Anthem, Cigna, Coventry, WellChoice and Oxford health plans are all saying that pharmacy costs are rising faster than in years past. Reasons include unit cost increases and utilization increases. Cigna is predicting 15% increases, the highest among the insurers cited. The reason appears to be that Cigna already has 80% of enrollees in three tier programs with a 50% generic penetration rate, while other insurers are still benefiting from implementing plan changes to three tier plans.

Medstat reports the costliest conditions for employers per EE/YR including short-term disability costs and absence costs. They are: preventive care-$344.63, coronary artery disease-$259.93, hypertension-$256.77, back disorders-$152.50, central nervous system trauma-$152.21, diabetes-$125.72, pregnancy with vaginal delivery-$113.90, osteoarthritis-$98.16, chronic obstructive pulmonary disease-$95.61 and musculoskelatal trauma and fractures-$82.16.

According to the Hartford Courant, a Hewitt survey shows that insurers will be asking large employers for rate increases averaging 13.7% before plan changes and negotiations. Some are predicting HMO increases of 10% or less. In Minnesota, Managed Care Review reports declining HMO enrollment with net income to HMOs nearly doubled. One wonders if the trend in HMO enrollment is reversing to the early days when only the young and healthy chose to enroll in HMOs?

As Cigna pushes to integrate disability plans with their medical coverage, they have released a study that states that chronic conditions represent 26% of medical episodes and 52% of medical costs. The average total direct disability and medical cost of an STD claim is $13,094, with $2,444 associated with STD benefits and $10,649 with medical benefits. By integrating these benefits, Cigna will offer medical rate reductions from 3%-7% for those who purchase LTD and STD and Cigna health coverage.

Health care spending in 2003 increased 7.4% in 2003, down from a peak of 10% in 2001 and the first slowdown since 1995. However, the growth in spending was just about twice as fast as the economy, which grew at a rate of 3.8%.

A 2004 Towers study of 1,000 employees of large and mid-size employers shows that only 28% of employees feel it would be appropriate to have employers ask them to fund health cost increases and 82% of employees believe they are already good health care consumers.

The IRS has ruled that if employees pay for disability coverage with after tax dollars in the year they are disabled, then the benefits in that year are not taxable, regardless of whether the coverage was paid for in the previous plan year with employer money or pre-tax money.

The latest stop loss rumor is that ING is selling their U.S. based reinsurance business. The business is estimated to be worth $1Billion.

A study by UHC cited in Business Insurance says that CDHPs attract healthier individuals to enroll. Why is that not a big surprise? Also, in-network utilization of CDHP plans was in the 90th percentile and ER visits dropped by 19%, but the cost of those visits increased 17%, suggesting more serious cases being treated in the ER. The use of preventive care services increased by 8%.

Blue Cross/Blue Shield health plans dominate the market in 35 states and insure about 33% of insured U.S. residents. The WSJ reports that BCBS plan earnings more than doubled on rate increases from 10% to 16%, allowing the plans to increase total reserves by about 33% to $31.9 Billion. This has encouraged lawmakers in NC, RI, PA and other states to demand the BCBS plans lower rate increases or provide rebates.

The US Supreme Court has ruled that patients cannot sue HMOs under state law for refusing to pay for doctor recommended care, due to ERISA pre-emption. One troubling issue overlooked in these suits is that patients did have the option of getting whatever care they thought they required by paying for it themselves.

According to Atlantic Information Services the average employee contribution for PPO health coverage was 15.12% for single and 32.79% for family coverage as of July 2003.

A University of Michigan study found that raising copayments on cholesterol lowering drugs did cause some patients to stop taking those drugs. This is another "surprise" like those studies that have found that patients in high deductible plans without Rx copays also spend less in Rx dollars. Sheer genius! We hope the study was not taxpayer funded!

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