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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: jseiler@ssbenefits.net www.ssbenefits.net November 2004 Issue

HAPPY HALLOWEEN!

We have never accepted contingent commissions at S&S Benefits Consulting, Inc. We are not publicly owned (Marshís stock dropped in half), so unlike what is alleged in some firms, we havenít put profitability and stock pressures above doing business in the best interests of our clients. The main brokerage houses in the news are Marsh, AON and Willis, but many other firms also accept these fees for P&C and health and welfare business. Another question is whether or not bid rigging has taken place in order to earn fees?

Various states, including Illinois are now investigating the receipt of contingency fees by not only brokerage, but also consulting houses. Having been in the business for over 20 years, we have always "known" that certain firms placed most of their business with certain carriers to receive overrides. Sometimes itís blatantly obvious to everyone except the client. Now that these override fees are under scrutiny, the profitability of the accepting firms will dwindle and they will have to make up for the lost overrides by increasing commissions on their current clients. This will increase employer costs.

Georgia has now rescinded its approval of the Wellpoint-Anthem merger, joining California. Reuters speculates that Texas may also rescind if the deal is not done by year-end.

Prior to all the contingent commission investigations, it was speculated that Willis was plotting a buyout of AON. With the stock of these firms that are under investigation dropping like a rock, it may be that there are no major broker mergers on the near term horizon.

Coventry Health Care is buying First Health for $1.8 Billion in stock and cash.

According to Emory University researchers, obesity and its related diseases are to blame for 27% of the rise in health care spending between 1987 and 2001.

John Kerry told the nation his plan on the government taking over all responsibility for health claims over $75,000 would not result in a tax increase. He has yet to explain to the public that if the government takes over the risk on these claim dollars, that it will also soon be deciding what is covered. If you think it is hard arguing with an insurance carrier, just try arguing with the government.

Spencer reports that average COBRA costs exceeded costs for active employees by 46% in the 173 companies it surveyed in 2004. 7.6% of employees and dependents became eligible for coverage while 20.4% of those eligible actually elected coverage.

The State of South Carolina has said it will stop paying for bariatric surgery starting January 1, 2005. The state plan covers 370,000 people and expects to save $7.1million. Blues plans in Florida and Nebraska are saying they will stop coverage and Cigna has said the same in several states. BC/BS of SC also stopped paying for the coverage for its 13,000 employees, saying they had very high rates of complications with the surgeries.

The libertarian CATO Institute says that health insurance regulations cost $169 billion per year and the cost leads to 7 million uninsured individuals. The author of the study also said that the medical liability system in the U.S. imposes costs of $113.7 billion, but provides just $33 billion in social value. We didnít bother to find the definition of social value.

NCQA reports that health care quality improved in its survey of 25% of health plans reporting performance data in 2003. For the 563 health plans that cover 69 Million Americans, performance reportedly improved by 4% or more in several measures. However, the NCQA President lamented that no data was reported to NCQA for the other 75% of the U.S. healthcare system.

Although some companies donít want to take the time, there is a lesson that many employers can learn from. Larger companies such as DaimlerChrysler and Ford are saving millions of dollars in company paid premiums by auditing their dependent coverage and eliminating "dependents" that are not entitled to coverage. Ford has eliminated 60,000 plan members since 2000 and is requiring employees to pay back company contributions for illegally claimed dependents. DaimlerChrysler made an amnesty offer and had 27,000 employees come forward to identify ineligible family members who were receiving insurance benefits.

We have a CD ROM multi-media presentation available for prospective clients who would like to consider using our services as a health and welfare consultant or broker. Please email us for a copy if you would like to learn more.

If you know someone in your organization or another company that would find this newsletter useful, please send us their name and email address and we will forward them a copy at your request.

STREET TALK-WHY BE LIKE EVERYONE ELSE?