November 2001

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

Why be like everyone else?

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

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Volume 3 Issue 11 Street Talk November, 2001 Issue

Newsflash from benefitnews.com. Rates are the most important factor in company selection of a health/dental plan for 41% of those surveyed. Thirty-seven percent- quality of service, 19% -network size and 4% - hassle free administration. Who would’ve guessed that rates are the most important- especially at this time of year when over 70% of health plans are renewing for January 1? In view of that, we’ll get a little more in depth on costs this month.

Watson Wyatt gave a survey of employer projections for 2002 from a survey of 200 companies of which 68% had 1000 or more employees. Total plan costs are projected to increase by 13.6% with PPO at 13.7%, POS at 12.7%, and HMO at 13.9%. Rx is expected to go up by 17%. Retiree costs will be higher. 41% of employers expect to raise contributions by the rate of increase. 44% said they’d go less than trend and 15% said they would go greater than trend. A full 71% are somewhat or very likely to reduce benefits and increase copays.

The Segal Company released a trend survey of major insurance companies, TPAs, PBMs and MCOs. Trend is the expected rise in claim costs without factoring in plan changes, etc. Trend reflects such items as government cost shifting, increasing reimbursement rates, utilization increases and technology. Here is a table:

	Without Rx	With Rx
FFS plans Medical actives and retirees <65	15.7%	16.4%
PPO Medical actives and retirees <65	12.7%	14%
POS Medical actives and retirees <65	12%	13.5%
HMO Medical actives and retirees <65	11.1%	12.8%
Rx retail carve-out Medical actives and retirees <65	19.4%
Rx mail order carve- out Medical actives and retirees <65	18.8%
Retirees 65+ Medical	10.5%	14%
Rx age 65+ carve-out Rx retail	20.5%
Rx age 65+ carve-out Rx mail order	20.5%
Dental FFS	7.5%
Dental PPO	6.6%
DMO	4.7%

Two very successful insurer IPOs in the market recently. Anthem Inc (the Blue Cross consortium) and Principal Financial both became stock companies and were able to raise substantial capital for growth.

In the meantime, Wellpoint bought the RightChoice Managed Care (BC/BS of Missouri) with the largest market share in the state (You may recall that Aetna pulled out and sold to Coventry). The purchase includes the HealthLink PPO.

The 2001 Health Confidence survey is out. Here are some highlights from the EBRI survey. 46% of consumers are extremely or very satisfied with the healthcare they have received-up from 39% a year ago. 20% name healthcare as the most critical issue facing America today. 52% of those with employment based health coverage are extremely or very satisfied with their coverage, while only 10% say they are not too satisfied. 47% say they are confident their employer has selected the best available plan while only 32% say they could do the same for themselves. 63% prefer the current employer based system to the "defined contribution" system where employees would choose their own plan.

Here are some estimated industry losses from September 11. Berkshire Hathaway –$2.2Billion. Lloyd’s UK-$1.9Billion. Munich Re-$1.95 Billion. ING-$546.9 Million. AIG-US-$800 Million. The goes on.

Don’t think the losses in the WTC tragedy won’t affect you. Almost all large claims for Life and health coverage are reinsured by the largest of the re-insurers who took huge losses in the WTC tragedy. The losses will affect the capacity in the market and will result in ratcheting down on the companies who buy reinsurance for all lines of coverage. With profitability squeezes, reinsurance may be hard to come by and will force companies to raise prices.