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

Why be like everyone else

S&S Benefits Consulting 219 Darien, Dundee, IL 60118 Ph: 847-428-5353, Fax:847-428-9876,

Email: jseiler_ssbenefits@interaccess.com

Volume 1 Issue 2-Street Talk November 30,1998

Happy Holidays!!!

The reinsurance market has seen a shakeup. Business Insurance reports that Swiss Re (who backs most of your self funded specific and aggregate contracts) is leaving the health reinsurance market after suffering heavy losses. Loss ratios have been over 100% for about two years now for many carriers. (For those of you who donít know, Swiss Re was the reinsurer of many reinsurers...this business can get complicated.) Not to worry, there are others willing to take up the slack for now. But the MGUs who supply most of the reinsurance quotes are quickly being put on the hook for profitability (which begs the question of why they werenít before). This means they will be more conscientious in underwriting and you will be seeing increases in this market. The interesting part is that many lost money by underwriting provider excess coverage for HMO contracts(doctors and hospitals), but there is now the discovery that the providers in HMOs didnít really manage claims all that much better just because they were in HMOs. They just needed someone to take the risk for the claims they canít manage (As the old adage goes.... "a claim is a claim is a claim.")

Soon we will need a summary issue for mergers and acquisitions. PCS is being sold by Eli Lilly to Rite Aid Corp. So one of the largest pharmacy benefit managers (suppliers of those candy cards for drug benefits) is being sold from a manufacturer of drugs to a retailer of drugs. Of course, parties involved claim there was no conflict of interest with formularies for Eli Lilly and now there will be no conflict with pushing retail business to Rite Aid. Maybe not now, but the temptation has got to be there for the future.

Provident has been in the news as selling their individual disability business to Unum. This is curious since it wasnít long ago that Provident merged with Paul Revere. Now Unum, who has been in and out of the individual disability market (lately out) has decided to opt in by buying the largest player in that market. What will happen when they decide to pull back as they have before. Will their acquisition costs drive up your disability rates?

Are you losing money on your capitation fees? Can your HMO or POS vendor explain those fees in their renewal calculations? Has your broker asked? Has your broker compared the capitations being charged on your last renewal to this renewal? Have male/female/age/sex demographics changed all that much since your last renewal? The renewal before last? What are you paying for? How many visits were recorded for those fees? Did the docs really control costs, or why are your HMO rates going up? Are you really getting your moneyís worth for that $35-$45 per MEMBER per month that you are paying...most likely for the healthiest part of your population, or is this just another profit pocket for your HMO? Are capitations being trended as part of your renewal..and if so, why? Are your stop loss rates lower for your HMO or POS than for your PPO? Why not? If your broker is not asking the tough questions while you are shelling out the big bucks for capitations, think about bringing in S&S Benefits Consulting to take a peak at your renewal.

Next issue we might talk a little about the "wonderful" percent of savings deals some PPOs are using to charge for access.

Alexian Brothers Health System has terminated a contract between 300 of their docs and United HealthCare according to Crainís, effective Feb. 1. In Bus Insurance itís been reported that 175 specialty docs are threatening to pull out of Pacificare in Denver. They also report a shutdown of the third largest HMO in Louisiana (Advantage Health Plan) due to losses. The Daily Herald reports that doctors in HMOs feel that the financial incentives and pressures of HMOs are hurting patient care according to findings in The New England Journal of Medicine. The study said 57% felt pressure to limit referrals. Crainís reports that Northwestern Memorialís exclusive doctor group is losing money after helping to finance its share of the new hospital and experiencing falling reimbursement rates due to managed care. Another article in that magazine says that malpractice insurance rates are escalating, sometimes into the double digits. This will affect you!

S&S Benefits Consulting is a partnership of benefits professionals with over 50 years in the health and welfare business. We specialize in the group business and donít try to sell you services where we have no expertise. If we canít help you, chances are, we know who can.

Call us at 847-428-5353 , fax us at 847-428-9876. Please e-mail us at jseiler_ssbenefits@interaccess.com to receive this newsletter via e-mail. We would prefer e-mail distribution to fax. Thank you!