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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/ March 2005 Issue

We would like to invite you to view our updated web site. Click on www.ssbenefits.net We’ve added a long promised article about the Blues in the "Truth" (in our opinion) tab, along with articles you will want to read about PPO discounts, HSAs and HRAs. Links have been added that are both helpful and fun on the "Useful Links" page. We will continue to try to provide you with CONTENT, both here and on our web site, that you are not getting elsewhere. In addition, we included a game you may find interesting before you attend or conduct your next big meeting! Let us know if you enjoy playing. Plus, we are willing to listen to your suggestions or even tackle a subject where you feel you haven’t been getting a straight answer.

Research conducted by the Commonwealth Fund shows that adults enrolled in HDHPs are less able to pay for their medical bills and more likely to be contacted by a collection agency. The results are based on Commonwealth’s December 2003 survey. In fairness, the survey was conducted before the creation of HSAs. The findings indicated that 49% of adults in a HDHP with a deductible of $500 or more have a medical bill problem or outstanding debt as opposed to 32% of adults in plans with a deductible of less than $500. Either way, that’s a lot of adults with medical bill problems. We saw no report on the margin of error for the study.

The U.S. Chamber of Commerce survey of 600 companies says that employers spent an average of $18,358 per employee on benefits in 2003. Of the over $18K, $5,653 were for medical benefits with $4,932 for paid time off and $3,303 for retirement and savings. Benefits comprised 37.6% of payroll. Medical costs were 11.6% of payroll.

Wellpoint profits in the fourth quarter were down due to debt-repayment costs and charges related to its November 2004 merger with Anthem. Humana profits were weak according to analysts, but profits still beat estimated earnings. Cigna’s quarterly net profit nearly doubled, aided by the sale of its retirement unit, but membership is down. Aetna reported that quarterly earnings grew by 21%, buoyed by better than expected membership enrollment. Revenue jumped 13%, driven by an 86,000 increase in medical membership.

In the wake of the Spitzer probe, Humana is making changes in the way it reports commissions reportable for those ERISA customers who file 5500 form information. Beginning with January 2005 plan anniversaries, Humana will report other payments (for volume or case specific bonus) made in addition to base commissions. United Healthcare has announced it will begin reporting in a similar fashion for ERISA groups. This is going to scare some people!

Due to a past relationship in a worker’s compensation carve-out agreement with another reinsurer, Trustmark’s ratings have been downgraded to BBB from A- by Fitch and to a B++ from A- rating by A.M. Best. This is unfortunate, since comp is not Trustmark’s primary business. The reduced ratings are causing what has been a good group insurance company to lose business, since most brokers are not covered under their E&O insurance for anything with less than an A- rating and most companies will not buy from a less than A- rated company.

A 2004 Mercer study of 3,020 employers found that the larger the employer, the more likely it was to offer a CDHP. The plans were offered by 12% of those with 20,000+ employees, 4% of those with at least 500 employees and 1% of those from 10-499 employees. Of the 88 employers who provided information on their CDHPs, 79 had over 500 employees. CDHP’s cost 17% less than PPO plans, but looking inside the numbers shows another story. The average cost for a standard PPO with a deductible of over $1,000 was less ($4,801 PEPY) than the CDHP cost of $5,233. This may be in part due to employer contributions to employee accounts.

American Re Healthcare has released an article showing that claim frequency is increasing RAPIDLY for claims of over $1,000,000. There were 1.2 cases per 1 million lives in 2000, 2.15 cases in 2001 and 4.33 cases in 2002. The figures were compiled from numerous fully insured and stop loss insurance carriers that ranged in size from 150,000 to 2.6 million lives.

Am Re also reported that per capita costs for healthcare in the U.S. are 74% higher than our nearest competitor (Germany) in G7 nations and triple those of our furthest G7 competitor (Japan). Despite the spending, U.S. life expectancy and infant mortality are the poorest of the G7. One factor, that we think would influence the other factors, is that the U.S. receives over one million legal immigrants and an estimated 500,000 illegal immigrants a year from around the world.

Anthem Blue Cross reports that radiology services now represent 10% of the healthcare dollar. They also claim that 50% of the imaging that is done does not provide information that improves patient diagnosis and treatment. Currently the Anthem Colorado and Nevada plans are pre-certifying advanced imaging tests.

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