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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 click: mailto:jseiler@ssbenefits.net                                                    http://www.ssbenefits.net/              June 2005 Issue

PacifiCare Health Systems has announced it has received all the clearances necessary to complete the acquisition of Pacific Life. They say the sale complements their recent acquisition of American Medical Security. Yes it does. One winner and one loser.

According to the Robert Wood Johnson Foundation, 73% of registered voters are concerned about losing their health coverage. Their concern ranked second to concerns about Social Security and Medicare solvency, but more important than jobs and the economy. The report found that 45% of non-elderly uninsured adults reported having one or more chronic health problems. The report did not elaborate on why so few registered voters actually vote.

United HealthCare bought Definity and now Wellpoint has announced the acquisition of Lumenos (a CDH pioneer) and their 214,000 members for $185M that is expected to close in the second quarter of 2005. Thatís only $864 per member. Lumenos reports expected operating revenue of $45M in 2005 (or only $210 per member per year). Given the price per member, one wonders if this is more of a ďshowĒ acquisition than a real positive statement about CDH plans.

According to news reports, Illinois has capped malpractice awards for punitive damages in the last legislative session. Caps were placed at $500K on physician claims and $1M on hospitals. This is on the heels of ISMIE Mutual raising corporate physician malpractice rates. The company has 56% market share in Illinois and says that since the year 2000, lawsuits against doctors and partnerships have risen to a level three times greater than expected.

All employers must inform Medicare eligible workers by November 15 whether their prescription drug coverage is at least equivalent to the drug benefits that will be available under Medicare Part D. The U.S. Centers for Medicare and Medicaid Services is expected to issue a model notice that employers could adopt and distribute to any Medicare eligible individuals. Guidance is also expected from CMS so that employers would not have to retain actuaries to make determinations as to plan values vs. Medicare. Notices are necessary since employer provided coverage that is equivalent or better than Part D qualifies as creditable coverage and allows Medicare eligible employees to delay enrollment in Part D without penalty. It will be interesting to see how this law affects sales of HSA plans that will not be allowed to have separate drug coverage as of January 1st.

According to MetLife, the number one worry of 71% of employees is having enough money to pay bills during a period of loss of income. The study reports that 42% of employees live paycheck to paycheck and only 24% of full-time employees feel in control of their finances.

Arthur J. Gallagher agreed to pay $27M to end investigations by state insurance regulators and the Illinois Attorney Generalís office. The settlement bars Gallagher from collecting contingent commissions, which also should be an income booster for Blue Cross of Illinois.

The Treasury Department has announced that is will allow a 2.5 month extension for claims to be paid from flexible spending accounts beyond the current plan year end date. The additional grace period for submitting expenses would still apply. Our opinion is that the employees who donít spend the money in 12 months will probably be the same ones who complain when it is not spent in 14.5 months.

Milliman reports that in 2005, roughly 45% of total medical costs will be spent on inpatient and outpatient hospital care, 37% will go to physician services and 15% will be for prescription drug costs. Three percent will be spent on miscellaneous services. A family of four will spend approximately $12,214. In a typical PPO plan that family will spend $2,035 in the form of deductibles, coinsurance and co-payments, with insurance picking up the balance.

A study by Wells Fargo of 414 employers, representing 339,000 eligible employees with most employers in the one to 500 employee size range, showed that 96% offered medical and Rx benefits. Employers picked up an average of 75% of the cost. 74% of employers with more than 500 employees were self-funded. Sixty-four percent of eligible employees were enrolled in PPO plans with an average cost of $3,799 PEPY for single and $10,596 for family (average of $5,314 PEPY for all coverage). Surveys are always somewhat suspect and some items in this survey were as well. It was reported that only 42% used case management (perhaps those that are fully insured didnít know that the carriers are doing this) to control costs. Another confusing item was that 48% reported using pre-certification and 48% reported using utilization management to help control costs. We didnít know that the two were so separate and distinct, but maybe that also confused the employers who were surveyed.