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

Why be like everyone else?

Rx cost increases may be even larger than most reports have been saying. According to an independent study by Brandeis University and PCS health systems, costs have increased by 24.8% annually from 1996 to 1999. This study is different from previous HCFA studies (which showed cost increases between 9.8% and 13.7%) due to the study focus on employer sponsored plans for those with continuous coverage. New medications accounted for 1/3 of costs and costs were greatest among 45-65 year olds. In our opinion, the giveaway of Rx card benefits that began with early HMO plans and has now spilled over to PPO plans has been a huge mistake by employers who have simultaneously tried to cut costs and have added Rx cards. PBMs talked employers into believing Rx cards under their programs would lower drug costs, when all along any underwriter worth their salt would have told a group that costs would rise. Now plans are trying to compensate for this mistake by raising Rx copays. Too little, too late. Rx benefits through a card are clearly one of the failures of managed care.

The Illinois Supreme Court ruled in May that HMOs could be liable for negligence involving a patient’s medical care. While doctors have always been liable for negligence, this ruling makes an entity liable. While the ruling does not affect self funded HMO’s directly, the price increases necessary due to this new liability may be extended to those HMOs to help account for fully insured liabilities held by the same company. The case involved a doctor with Chicago HMO who had 6000 patients and who misdiagnosed a 3 month old girl with bacterial meningitis. The girl became severely and permanently disabled.

Sixty-five percent of workers view their health insurance as their most important benefit according to a survey conducted by EBRI and WorldatWork. 49% rated their health insurance as excellent or very good and another 31% rated their coverage as good. 43% of employees have passed up jobs because of lack of adequate health benefits. Retirement savings plans were ranked second in importance by 46% of respondents.

House leaders have pulled a bill that would let doctors bargain collectively. The bill was sponsored by Rep. Tom Campbell of CA. Henry Hyde and Dennis Hastert appear to be supporters of the bill from Illinois. The US Chamber of Commerce and the American Association of Health plans oppose the bill, saying that collective bargaining would increase health costs.

Minnesota appears to again be leading the way with ideas that don’t work. One has to congratulate the state for trying. Vivius is calling its new system a "Personalized Health System." Employees will price out doctors from 22 specialties to provide them with care on a capitated basis. Providers will have to agree to a fee and employees will have to choose various copayment levels for in town care. They will also purchase a wrap policy for out of town emergencies and for care not covered by the providers chosen. Employers will contribute dollars on a pre-tax basis to FSA accounts for the employees to use in making their selections from a web-based system. Yet to be addressed are such items as customer service in the event of problems; docs choosing to withhold treatment that can’t be accounted for through capitation (or, on the other hand, docs who practice unnecessary medicine); docs who have been fighting capitation now agreeing to it; or the willingness of a legitimate insurance company to try to price the wrap around risk for emergencies or non-capitated care.

Another Minnesota group is going the opposite direction. With HealtheCare employers will contribute to personal accounts the way they do for health insurance premiums. A portion of the money will automatically be used to buy basic medical coverage. Employees will be able to buy up the level of benefits or buy other health care related services such as alternative medicine or health club memberships. Money left in the account can be carried over from year to year (in conflict with IRS rulings, but based on the legal opinions of HealtheCare). This sounds strangely similar to a cafeteria plan, but with worse tax consequences if the IRS does not approve. Given the amount of flexibility, one wonders if/how insurance will be priced for self-funded or fully insured arrangements for anything less than a 1000-life company.

Prudential (what is left of it) has been fined close to $200K by Georgia for violating the state’s prompt payment rules to process clean claims within 15 days of receipt. Others who have been fined include almost every major player in the HMO business.

Smaller employers do not focus on quality of HMOs when purchasing health insurance. The US Agency for Healthcare Research and Quality held focus group studies that showed that price and access are major considerations in networks. Clinical quality and accreditation were rated last. Employers were skeptical of quality data presented when their experience or that of their employees was satisfactory. If the truth were told, the same is probably true of all but the largest employers.