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

Why be like everyone else?

A study by a Columbia University researcher says that when there are too many choices in 401(k) plans it adversely affects participation. A study of 900,000 workers in 647 plans found that the higher the number of choices, the lower the participation percentage in the overall plan.

Enrollment in limited benefit plans has risen by 20% over each of the last three years according to the WSJ. The limited plans may have benefits that are capped at amounts such as $1,000 per year, but usually cover wellness doctor visits to a limited amount and may offer "catastrophic" coverage up to a limited amount such as $5,000. With the sluggish economy these plans are being offered by companies such as Lowe’s, Wal-Mart and McDonald’s to their lower paid part-time employees.

The CDC reports that obesity is a driving force in health costs and is now costing almost as much as smoking. Obesity and smoking now account for about 10% of all health spending. Deaths are down and disabilities are up for a number of diseases. Disease (death % decrease/disability % increase) as follows: Hypertension –73%/+70% Heart Disease –29%/+44%, Cerebrovascular –48%/+36%, Diabetes –27%/+36%.

Of the 41 million without health coverage it is estimated that 21M to 31M are without coverage all year and 59M are without coverage for part of the year according to the CBO. It is also estimated in other studies that 20% of those without coverage could obtain coverage, but choose not to.

The IRS has clarified that laser eye surgery (lasik and radial keratotomy) is a deductible health care expense because it meaningfully promotes a proper function of the body. Breast reconstruction due to cancer is also covered since it ameliorates a deformity directly related to a disease. Teeth whitening does not qualify as deductible.

The nation’s 42 Blues plans increased profits by 43% overall in 2002 and membership (85.3M) is at it’s highest since 1981. Profits accounted for 2.4% of premium revenue. CareFirst of Maryland has been kicked out of the Blue Cross association since a new state law requires 10 board members to be replaced by nominees from the state legislative leaders.

A Towers survey in 2/03 of employers with 1000 or more employees shows that employees don’t feel it is their responsibility to fix the problem of rising health costs. Although 87% agree that health costs are rising higher than inflation and 63% thought those costs affected employer profits, only 46% of employees believe that employers are unable to absorb the cost increases. The survey found that most employees already feel they pay a fair share of health costs and they view themselves as effective health care consumers.

According to Long-Term Care Insurance Sales Strategies Magazine, as many as 4 in 10 applicants are denied LTC coverage for health reasons.

One HMO plan that has begun offering CDH plans says that the CDH plans are unrealistic, with pricing for High deductible plans in the same range as for a high-end HMO product. Another major carrier than has made CDH plans available reports that although the buzz around the product is very high, they have yet to sell one quote. We also hear word that one of the largest carriers in the country has only sold one plan in the Chicago market. Feedback we are receiving from various sources says that brokers are mostly non-believers who are offering the product only due to demand, even though they realize there are really no long-term savings.

Onex of Canada (owners of Loews Cineplex, Dura Automotive and Rogers Sugar) has acquired bankrupt Magellan Health Services for about $200M U.S. This is good news for Magellan employees and clients (including Aetna clients) who should see no basic change in structure and service that usually results from mergers within the same industry.

Prudential has sold it’s P&C business to Liberty Mutual for $413M and it’s New Jersey P&C to Palisades group for $260M as they attempt to get back to their basic business lines and remove themselves from markets where they don’t have the scale to be a market leader.

Aon’s Spring 2003 Trend Survey reports the following trends including Rx for medical: HMO-16.4%, POS-16.1%, PPO-15.7%, Indemnity-17.2%. Without Rx: HMO-14.7%, POS-14.5%, PPO-14.4%, Indemnity-16.4%. For dental: DHMO-4.8%, PPO-7.6%, Indemnity-7.6%. Pharmacy is 17.7%. Vision is 3.8%. Trend figures are for 12 months while trend underwriting uses trend for more months (from the mid-point of the experience period to the mid-point of the renewal period, including the gap to the end of the current policy year).