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

Why be like everyone else?

PBM consolidation continues. Express Scripts has reached an agreement to purchase NPA (National Prescription Administrators) of New Jersey. Meantime, according to Hewitt, half of all employers who use a PBM have implemented or are implementing a three-tier design for Rx copays. Many others are indexing Rx costs by using coinsurance instead of copays. Drug costs are expected to reach 17% of the healthcare dollar spent.

Oral Health America rates American dental programs as a C. One third of Americans fail to see a dentist each year, which could (really?) be attributed to the fact that 108 million Americans don’t have dental coverage.

An International Society of Employee Benefits Specialists survey brilliantly states that cost management is the key driver for benefit program policy. 85% of employERs cite controlling healthcare costs as their top priority. For employEEs, retirement security is the top priority of 60% of those surveyed VS. a Hewitt survey of 528 employers found that health care ranks #1 as the most important benefit for EEs (55%) or one or two for 82% of EEs. Which survey is right??? Decisions, decisions…..Anyhow, health care outscored compensation by a 2:1 ratio. 66% of employees say that healthcare benefits are the major reason for staying or moving to a job. While 88% of employees say they are extremely or somewhat comfortable with taking more responsibility for evaluating and choosing health plans on their own, only 61% of employers believe the same. We’d guess reality is much different if EE’s were forced to shop the market.

HMO earnings are up 16% for the first 6 months of 2001 compared with the same period in 2000. Two exceptions were Aetna and Cigna. Aetna continues bad news with a downgrade from Moody’s. PacifiCare also reported a 4^th quarter loss and cut 1,300 jobs. Wellpoint reported a 23% rise in 4^th quarter profits, due in large part to their many recent acquisitions. Employers self-insuring their HMO plans were up from 6% to 13% according to Mercer in 2001. The ERISA exemption from state laws is proving attractive along with lower premium taxes. Self-funding even a partially capitated HMO is a waste, since any savings are usually overcome by steep capitation and network access fees. Aetna has been replaced by UnitedHealth Group (UHC) as the nation’s largest insurance provider. Cigna is ranked third. Only Aetna has declining enrollment Prompt pay laws in Texas have forced $26.1M in restitution payments from HMOs in Texas. Leading the way were Aetna ($12.7M), BC/BS-TX ($6.5M), Humana ($2.1M) and Cigna ($2.3M).

In Illinois, HMO enrollment fell by 6% in 2000 and the first half of 2001 while premium revenues increased by 8% in 2000 according to Allan Baumgarten’s Part One Illinois Managed Care Review. The average premium per commercial member was $142.01 per month and the average loss ratio was up to 89.2%. Nine of 19 Illinois HMOs lost money.

Calculations from Kaiser, Families USA and Spencernet estimate that in 2001, 2 million Americans (1.145M employees) lost their health insurance and 450,000 individuals elected COBRA. The EBRI statistics show that COBRA users average 150% higher claims than active employees. CalPERS can’t stop the bleeding in it’s health plans and is considering putting all 1.2M of it’s members into a self-funded PPO OR two to three HMO’s vs. the many current plan offerings which decrease their market influence. If that happens to CalPERS with huge enrollment in one state, one wonders about the genius’s that split their people between multiple companies in multiple states and totally delete what little market clout many of these employers already have.

Good news! From the IRS! According to Benefitslink, the IRS has decided they won’t tax frequent flyer miles received for business travel but used for personal purposes (not including conversion to cash).

After acquiring ING’s stop loss business in 1999, Safeco is acquiring $240 million in excess risk and $10 million in group life premiums from Swiss Re, further consolidating that market.

The US Chamber of Commerce reports that benefits costs were 37.5% OVER wages, or $16,617 per employee in 2000. Their survey covered 456 companies with 787,346 workers. Employers spent an average of 10.5% of payroll ($4,800 per employee) on health care benefits. Average sick days were 5.1 paid. Paid vacation ranged from 8.6 days for one year to 19.8 days for 20 years of service. The cumulative cost of time not worked was $4,300 per employee.

When reviewing "defined contribution" or "consumer driven" health plans, many rely on the IRS saying in Section 105 of the code that unused contributions can be carried forward from year to year. However, the IRS has announced that it will not rule on this yet, which calls the legitimacy of such plans into question. If the IRS eventually rules that these accounts are FSA’s, "use it or lose it" would apply and the plans would violate code. Other areas of uncertainty include whether the arrangements can use the unused money to pay for insurance premiums, whether HIPAA non-discrimination rules apply and whether the arrangement is subject to COBRA?